In recent years, the world's supply chains have experienced unprecedented levels of crisis in modern history.
Prior to the pandemic, international tensions, the push towards more sustainable economies and policies, among other factors, were already generating stress in global supply chains. The covid-19 pandemic proved to be the tipping point.
The flow, transportation, and transformation of raw materials, inputs, and products cannot be fully done from home. Companies were forced to safeguard the health of their employees by restricting in-person work, which led to a decrease in demand for certain products and services that were previously stable. This added variability to demand, while on the other hand, companies were forced to work with limited personnel and resources or with practices for which they were unprepared. This added more variability to the supply, generating a bullwhip effect due to the dependence between global supply chains.
In an attempt to increase inventories, global storage is collapsing while logistics ports are in chaos and at full capacity. The lack of supply of cargo transportation personnel is also impacting the availability, times, and prices of global logistics. All these impacts took time to reflect. The crisis and inflation of the last few months partly have their origins in these unbalanced supply and demand factors. Supply chains will not be able to return to pre-pandemic levels, at least not in the medium term.
What can we learn from this? According to Yuval Noah Harari, urgent attention and policies are needed to care for the world's telecommunications and logistics infrastructure. Technological and logistical infrastructure is of paramount importance for the development and sustainability of value and supply chains. In summary, there is a need to focus on modernizing supply chains, not only in physical capacity, but also in technology that allows for intelligence, planning, increased resilience, and automation of supply processes.
Ideally, companies should seek local procurement, diversify supplies, invest in storage capabilities and technologies, and have better systems and technologies to support uncertainty in value and supply chains. Unfortunately, some sectors have not been able to make the necessary adjustments and are affected, while other companies that have focused on renewing themselves in the face of uncertainty are navigating these difficult times in a more orderly manner and have a greater chance of success and growth.
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