Why is everything sold out right now?

Do you have the impression the world ran out of everything? 

As I am sure you are aware, the global supply chain crisis continues to worsen, resulting in extended delays and significant cost increases.

Comparing this year to 2020, costs of ocean freight alone increased by more than 200%.  Packaging has increased in excess of 35%.  Binder and powder costs have increased 10% to 65%. 

Should we only blame the Covid-19 pandemic for the global shortage? 

Lean manufacturing

Are you familiar with lean manufacturing (also known as JIT: Just in time manufacturing)? 

Lean manufacturing is a form of inventory management that requires working closely with suppliers so that raw materials arrive as production is scheduled to begin, but no sooner.  The objective is to have the minimum amount of inventory on hand to meet demand.

This strategy has numerous advantages such as waste reduction, improved efficiency, greater productivity, smoother production flow and increased productivity and profit.

Lean manufacturing relies heavily on precise forecasting and strong relationship with key suppliers.  When something goes wrong, that's a problem because there are no backup options in place.

Some of the risks are supply chain disruptions, missed opportunities and unexpected price changes.

What went wrong?

Shortages in the global economy arise from factors beyond lean manufacturing. 

The spead of Covid-19 has sidelined port workers and truck drivers, hampering the unloading and distribution of goods manufactured at factories in Asia and arriving by ship to North America.

For example, a company that buys adhesives from suppliers around the world and then sells them to factories that makes vinyls, magnetic sheeting and other industrial products, might be waiting for supplies to arrive, because his supplier on his side is awaiting to receive a chemical from his supplier in China.

That's what we call a ripple effect.  The automotive sector faced a computer chips problem.  The pandemic has slowed sawmills operations causing a shortage of lumber and drove the prices off the roof.  The entire supply chain has been disrupted. 

What is the impact on your business?

Is your current supplier out of stock?

As highlighted above some of the risks of lean manufacturing are supply chain disruptions, missed opportunities and unexpected price changes.

Do you feel overwhelmed by delays and price increases?  Maybe your production is stopped because of delays or lack of material?  Are your stimulus plans at risk?