4 Ways To Protect Your Business From 2022 Supply Chain Disruptions

The supply chain crisis is not going away. Here are the three biggest reasons for reaching that conclusion:

  • Port slowdowns are likely to persist — made worse by the now rapidly-spreading Omicron variant which will lead China to enforce strict monitoring, testing and quarantine protocols at ports, according to MarketPlace. This will extend delays between the time customers order goods made in China and shipped to U.S. consumers.
  • Labor supply will fall further short of demand as the work-from-home trend continues longer than many had expected due to the Omicron variant and workers continue to quit what they see as toxic workplaces exacerbated by the risk of Covid-19, according to the Wall Street Journal. This will limit the supply of manufacturing, port, truck, train, warehousing, and last-mile workers needed to get goods to consumers, .
  • The semiconductor shortage will continue through 2022. Demand for goods that use computer chips will remain high and because of the lead time to build new semiconductor factories, supply will not catch up with demand in 2022, according to Forbes.

This means that the risks of doing nothing in the hopes that supply chain problems will work themselves out exceed the risks of reengineering your supply chain to boost its resilience to disruptions.

Here are four things business leaders must do now to boost the resilience of their supply chains.

1. Switch from just-in-time to de-globalized supply chain.

The pandemic has exacerbated the move away from efficient, just-in-time supply chains to resilient ones. Simply put, that means countries are trying to become less dependent on the idea that they should manufacture goods in the countries with the lowest labor costs and ship them cheaply and quickly to consumers.

They are shifting more to resilient — or deglobailzed — supply chains. This means building manufacturing plants for strategic goods in the countries where they are consumed. As Forbes wrote, “These policies are meant to ensure that key inputs – semiconductor chips and rare earth metals, for example – are not being held hostage by the nations that control these inputs.”

Business leaders should follow this broad trend by reengineering their supply chains and adopt technology that supports supply chain resilience.

2. Invest in technology to improve supply chain resilience.

Companies are increasingly investing in new technology to boost productivity. As IDC predicted, this means that in the next several years, companies will adopt technology that reduces supply chain bottlenecks by 10 percent. Companies will also invest in software and services that boost productivity and use artificial intelligence to do more with fewer workers.

Last month, I offered business leaders a guide to how they should reengineer their business processes to take advantage of the benefits of such technologies. Here are the key steps they should take:

  • Measure the broken supply chain’s damage to your business.
  • Find the causes of your supply chain’s collapse.
  • Forecast how long it will take to repair the broken links.
  • If you can’t wait, rebuild your supply chain.

3. Boost worker pay to improve productivity.

Given the difficulty of hiring workers and retaining them, business leaders must boost pay and increase opportunities for workers to develop new skills and gain knowhow about your business.

Investing in your people will support a work environment that aligns your company’s mission with the career goals of your people. By retaining workers and boosting their skills, your operations will become more productive.

As the success of the New England supermarket chain, Market Basket, illustrates your happy and productive employees will help you recruit and retain more workers to satisfy rising demand for your products.

4. Raise prices to offset higher costs.

Finally, in order to generate the cash flow needed to pay for these investments, you will need to raise your prices. Doing so may create pain for consumers whose pay raises are not keeping pace with inflation.However, if other businesses follow your lead, wages may rise faster and those higher prices will be affordable.

Follow these four steps and you can boost the resilience of your supply chain in 2022.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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