May 2022

Just when it appeared that the ongoing global supply chain crisis couldn’t get any worse, along comes China’s latest attempt to chase COVID zero. The pre-existing crisis was the result of ongoing COVID workforce turmoil, plus the Black Sea cargo ship logjam, Russian airspace and train route closure, rising oil prices and raw material shortages, all caused by the war in Ukraine. But to add to this, Shanghai has now been placed into strict lockdown, meaning that its seaport and airport – for cargo shipments, the world’s busiest and third busiest, respectively – are also in gridlock, creating even more chaos worldwide.

The global supply chain is a complex, interdependent and therefore easily-broken system that struggles to withstand major disturbances even when they occur one at a time. The current perfect storm of shocks is likely to see it strained to its absolute limit, making it vital for Australian businesses to adopt a four-point strategy to help them overcome the disruption.

1. Conduct a supply chain audit

Review all aspects of your supply chain management by conducting an audit. Examine how you handle supplier capabilities, customer expectations, fluctuations in supply and demand, order completion and product returns. This will help to identify weaknesses and eliminate potential bottlenecks, creating a more efficient and agile system.

2. Diversify your suppliers

It’s a fact that many Australian businesses have become significantly dependent on products sourced from China, but finding alternative suppliers is easier said than done. Even if you can do this, you may have to pay more.

It may be possible to obtain similar products from Vietnam, India, Indonesia or Thailand, but factor in longer transit times. These countries don’t have efficient container ports of the size found in China, and goods may have to be transshipped via Singapore.

E-commerce giant Alibaba specialises in putting purchasers in touch with manufacturers, and you can limit your search to Australian products, or goods from any of the countries just mentioned. It’s also possible to track down manufacturers on Amazon.

3. Invest in appropriate software

Installing the latest inventory management software can pay dividends which will see you quickly recover its cost via sales that would otherwise be lost due to lack of inventory. Such a system – integrating data from your suppliers, manufacturing facilities, sales operations and customers – will provide immediate insights into inventory levels, purchase orders outstanding, sales orders unfulfilled, imminent new orders, and supplier lead times.

4. Identify opportunities to innovate

Use your re-assessment of your supply chain and logistics as an opportunity to innovate. You may be able to streamline your operations with processes that are better designed, purchase up-to-date equipment to replace outdated or badly performing assets, and embrace automation and robotics. You could also consider 3D printing, to produce some parts and components onsite instead of sourcing them from a distance. Innovation can help your business to become more productive and environmentally sustainable.

Investment finance at your fingertips

If you need funding to redevelop your supply chain and overcome potential disruption, contact us to discuss a range of business loans and equipment finance suited to your needs.