The COVID 19 pandemic unearthed numerous weaknesses in the global supply chain. The industrial distribution industry is still dealing with the effects of shutdowns and stalled operations followed by a rapid spike in demand.
Distributors can’t get inventory, manufacturers can’t get supplies, and both are facing major shipping delays and increased costs. Toss in a labor shortage and the need for a more skilled workforce, and the current supply chain problems can seem insurmountable.
“We’re currently seeing a bullwhip effect in the supply chain: small ripples toward the end, but as you come closer to the whip or distributor, the ripples are larger,” says Dr. Malini Natarajarathinam, associate professor of engineering technology and industrial distribution at Texas A&M University.
When customers increase their orders, this provides the first, smaller ripples, signaling a change to the distributors. Vendors also throw their own ripples into the mix by believing the demand is more than it may be due to this effect.
“The changes become bigger as the supply chain goes on, so with changing customer demand and the access to supply being limited, the effects seem very pronounced,” explains Natarajarathinam. “A seamless supply chain is making supply meet demand, but right now, we have a change in supply and a change in demand. It’s a perfect storm.”
The Importance of People
Natarajarathinam and Craig Conrad, senior lecturer of engineering technology and industrial distribution and 40-year veteran of the electronics industry, both believe the human element — the engagement with vendors and customers as well as the recruitment and training of new employees — will be a major contributor to propelling companies past the current global supply chain disruption.
Vendors and Suppliers
Natarajarathinam says that industrial distributors and suppliers have always fostered quality relationships with each other, but now is the time to enhance those relationships. “Although you still have to engage with some companies virtually, having a close ear to what suppliers are thinking and doing means distributors are prepared and not just waiting for things to happen,” she says. “If any part of the supply chain can do this, it’s industrial distributors because that was one of their biggest core competencies in the past: their engagement and how they built relationships and trust with their suppliers.”
Natarajarathinam believes it’s more important than ever to make sure all relationships in the supply chain are strong. Vendors and suppliers should talk to each other about their production goals and forecasts, what they have coming and how this information aligns.
Customers
Natarajarathinam also encourages distributors to take this relationship-building a step further and begin engaging more directly with customers. These relationships will provide key insights into forecasting so distributors aren’t left scrambling if their customers change an order unexpectedly. “When you’re planning, you want to engage with customers to figure out what they’re going to want,” she says.
These honest conversations can help distributors in an instance where they’re not able to provide a certain product due to the current supply chain issues. “There are so many strategies you can take to smooth that situation out if you know in advance what the customer is expecting,” she says.
Natarajarathinam poses that engagement and conversations with customers will provide deeper visibility into their operations and wants, respectively.
Current and Future Employees
Given the uptick in digitalization across the industry, companies are seeing a decreased need for manual labor replaced by an increased need for complex technical skills. The labor shortage is directly related to the global supply chain disruption currently rocking the industry — and solving it is critical for long-term success.
In the wake of this chaos, distributors will need employees who can help their businesses succeed into the future. “Right now, people are training on the job for all the new changes, but when we get to that steady state, we need people who can come in ready, and that should be a priority for companies, too,” says Natarajarathinam.
Conrad says companies should also focus on better understanding the wants and needs of their future employees so they can do a better job at attracting new skilled talent. “There are many jobs where flexibility is going to be very important to the employee, but companies are underestimating how much of a big deal this is going to be.”
He adds that this altered landscape of working also has a dramatic impact on management, motivating employees, hiring and promoting, incentivizing and training. “I think many companies managed a hybrid or remote environment as an emergency tactic because of COVID, but how do you do this on a sustainable basis?”
Conrad thinks that the long-term effects on the business are what companies need to focus on, just as much as their current supply chain needs.