When linking up dozens or even hundreds of firms, with thousands of workers among them, all trying to move in coordination across continents to complete the task of getting products on shelves — all sorts of things can go wrong. And there was never any reason why a whole bunch of things couldn’t go wrong at the same time.
For all the talk of crisis and collapse, the system largely held through the holiday period. But the past two years have laid bare vulnerabilities that have long existed in the system. To name a few: lack of capacity, manufacturing concentration by geography, length and complexity of supply chains, and scale mismatches among links in the chain.
The question for retailers, brands, vendors and governments around the world is whether supply chains will be rebuilt for the future, with unknown crises in mind, or if the industry reverts back to “normal” once the current backups in the system ease.
To name just a few things that went wrong in 2021: A ship famously became lodged in Egypt’s Suez Canal, blocking traffic for six days. China closed one of the busiest ports in the world because of a COVID-19 outbreak. Vietnamese factories were fully or partially shut down because of outbreaks, wreaking havoc on apparel and footwear production.
COVID-19 also disrupted manufacturing areas in Bangladesh, India and other major producing countries, not least of all China. A demand surge in the U.S. led to shortages in cargo space, shipping containers and other equipment that led to skyrocketing ocean freight prices.
While tied together by the pandemic and its consequences, the problems were different and exposed different vulnerabilities in the system.
Consider the impact COVID-19 outbreaks had on ports and factories in China. On the surface, it seems like a pandemic-induced problem. But a supply chain system less reliant on Chinese production could absorb those shocks with less pain and for fewer players.
“Some of our clients are really taking a hard look at spreading risk so that it’s not so China-centric or even Asia-centric,” said a senior managing director in FTI Consulting’s business transformation practice. “It’s a hard thing to do. It’s hard to get out. There’s so much infrastructure and so much manufacturing capacity that’s been built up in China. So it’s not like flipping a switch.”