Kwayga | September 6, 2021

4 min read

The Covid-19 pandemic disrupted logistics and supply chains around the world. From jammed ports causing shipping delays to a shortage of lorry drivers leading to supermarkets’ empty shelves, businesses are being impacted in many ways and the recent holiday schedule caused more disruption.

However, as Albert Einstein said, “in the midst of every crisis, lies great opportunity”. Let’s have a look at what is happening worldwide and what you can do to mitigate the current issues caused by the pandemic and protect your supply chain from future crises. 

Strong demand for consumer durables during the second half of 2020, when a significant part of the global population was in lockdown, and the consequent boom in manufacturing have led to congested ports on the world’s main shipping routes from Asia to Europe and the US. The Suez Canal blockage in March 2021 aggravated the problem even more. Serious delays were registered in the time for ships to dock, for containers to be taken to shore and onto their final destination. Freight costs rose, as containers were in short supply causing the perfect storm in global logistics.

“Enterprises that would work in a ‘zero inventory’ operation started increasing their inventory to be safe…”

To avoid delays during the holiday season, European and American companies are preparing themselves ahead of Christmas and stocking up earlier, which also contributes to the current logjam in key ports. Additionally, enterprises that would work in a ‘zero inventory’ operation started increasing their inventory to be safe due to the current lack of efficiency in the global supply chain system. 

The ports of Los Angeles and Long Beach in California, the two largest in the US, are facing strong congestions since the first quarter of 2021. In February, 40 container ships we registered as waiting offshore, and now, in August, there are 37 at anchor. In normal times, that number would be one or even zero. In this cyclical ecosystem, container ships waiting offshore means a delay on their return to Asia for the next shipment. 

Talking about Asia, the closure of the major container terminal at China’s Ningbo-Zhoushan Port after a staff member tested positive for Covid-19 has also shaken global logistics. As China’s second busiest port, this two-week closure has left dozens of ships waiting to dock and load cargo for western markets.

Despite higher logistics costs, some organisations, such as Adidas, are trying to decrease delays by using more air freight. Nevertheless, this is not a realistic option for most small and medium-sized companies, nor low-value shipments.

Logistics and supply chain disruptions are not happening only because of ports congestions though. In the UK, supermarkets have expressed concern about accessing food supplies. Nando’s, the chain of chicken restaurants, has run out of chicken. While recently, McDonald’s has stopped offering milkshakes in all its restaurants in the country. 

“Unfortunately, more UK food shortages are expected from the 1st of October when the new EU to GB import rules come into force.”

The UK faces a shortage of approximately 100,000 lorry drivers, which has caused this crisis. The lockdown implemented in the country due to the Coronavirus pandemic has created a backlog of drivers waiting for their licenses. Besides that, drivers who were close contacts of people who tested positive were forced to stop working to self-isolate when contacted by NHS through its Track and Trace app. While in the UK, Brexit also had its share of the blame as roughly 25,000 drivers as well as meatpacking and fruit picking workers from the EU went back home after its implementation. Unfortunately, more UK food shortages are expected from the 1st of October when the new EU to GB import rules come into force, i.e. Health certificates and pre-notifications for the arrival of Products of Animal Origin (POAO), low-risk animal by-products not for human consumption (ABP), and High-Risk Food Not Of Animal Origin (HRFNAO).

In addition to logistics issues, the shortage in supplies has driven prices up with some raw materials increasing significantly. Palm oil prices, for example, have increased more than 135% in 2020. Energy Prices globally have skyrocketed in 2020, so overall, it is no surprise to see increased prices of many consumer goods.

It has not been easy for companies to deal with the current global situation. It is necessary though to learn from what is happening and to rethink and transform supply chains to be protected against new crises and guarantee business continuity.

To support your supply-chain resilience, Kwayga has highlighted 4 steps to reduce risks in your supply chain.

1.      Map your supply chain. Start by identifying your key tier 1 suppliers, i.e. the strategic suppliers you deal with directly. You should recognise their ability to respond to your supply requirements and risks. It is also important to understand how flexible they are to change production and purchase order fulfilment to different locations, or how they would treat you in case there is an inventory shortage. As you are probably not their only client, it is important to understand what priority they would give to you and your orders. This way, you will identify your vulnerabilities and will be able to protect your company from existing risks.

2.      Diversify your supply base. Resilient supply chains cannot rely on a single source. It is crucial to identify secondary suppliers in different regions to secure additional capacity and not to be vulnerable to the same risks that could emerge from one specific location. If possible, try to have a significant portion of suppliers closer to you, instead of depending on distant sources. This will facilitate logistics on a daily basis and help to avoid major risks caused by shipping bottlenecks as we are currently experiencing. Kwayga.com can help when diversifying your supply chain, as outlined below.

3.      Hold safety stock. We understand the risks involving holding safety stock as it can become obsolescent and expensive. However, the same way resilient supply chains cannot rely on a single source, it is risky to trust in ‘just-in-time’ operations due to the issues with supply shortages and transports we have been facing. It is important though to find a balance to avoid both the risk of keeping this inventory and the risk of running out of stock.

4.      Supply chain digitalization. Covid-19 has made clear the benefits of having a digital supply chain. The real-time visibility of supply chains allowed companies to quickly identify disruptions caused by the effects of the pandemic and respond to them as soon as possible. Also, the use of AI simplifies various activities of supply chain management, from planning to moving and storing.

As we mentioned at the beginning of the article, in every crisis lies great opportunities and firms that have the ability to identify those opportunities to improve their supply chain and innovate will be ahead of competitors.

Discovering new suppliers could be the first step for you on this journey.

If you are struggling to find new business partners, we have the tools to help you. 

Kwayga.com is an AI-driven matching platform of buyers and suppliers focused on the Food and Beverage sector. We put the right buyer with the right supplier at the right time. Many retailers and manufacturers in the F&B sector have joined us seeking new suppliers for when they wish to diversify their supply chain or find out new trends and opportunities for New Product Development. On Kwayga, you can post deals anonymously, discover new qualified suppliers on our Business Network, or use our messaging centre which has the power to eliminate any language barrier. 

Create your FREE profile and join our expanding business network!

Written by Lara Gomes