If there’s been any lesson to be learned over the past two years, it’s that our global supply chain is fragile. From The Great Toilet Paper Shortage of 2020, to the Great Car Shortage of 2021, we learned that it doesn’t take much for the grocery store shelves and the car lots to turn into vast deserts of emptiness.
Manufacturing in the United States has definitely felt the pinch of a disrupted supply chain. I’ve heard from people in a variety of industries that delays in electronic or even non-electronic hardware components were common. Single-board computers, PCs, and touchscreen displays seemed to be especially hit. At one point, the lead time was three weeks. Then it was six weeks, which quickly turned into six months. Finally, we heard that they weren’t sure when the components would be available. Today, the lead times for many items are back to three weeks. However, the risk of volatility is still there. Many companies have no idea how long the current lead times will last.
Cambridge Viscosity, I’m happy to say, has done a good job in our inventory planning. Our boards are custom-built from scratch by components that are purchased in bulk. Our planning/buying team created enough room in our inventory management so that any six-month lead times had very little impact on our ability to manufacture products.
Many companies weren’t so lucky, because they operate using just-in-time (JIT) inventory management. In normal times, this is a good strategy that helps companies avoid stocking parts that they can’t realize immediate revenue on. When there are supply chain disruptions, JIT inventory management can cause problems. Many third-party suppliers are stocking up on larger quantities, and OEMs are beginning to stock inventory, because no one is sure when the supply chain disruptions are going to end. This creates artificial demand and hoarding which increases the delays.
And there are a lot of disruptions right now. Power outages at factories in China have led to worker furloughs and a reduction in worker hours, which means fewer goods are being made. There’s also congestion at major Chinese and U.S. ports, which creates further delays. Some of these delays are estimated to be as much as 22 days, and about 85% of the cargo coming into the West Coast, USA ports is expected to be late. As of October 1st, there were 51 ships waiting to berth at Los Angeles and Long Beach ports, with ship wait times averaging 9-12 days. This is causing increased demand in airfreight. Add that to the fact that there is a record shortage of US truck drivers, and we have a hurricane-size, perfect storm of a problem.
Not surprisingly, there has been a lot of speculation about a possible bullwhip effect. The bullwhip effect is the idea that changes – even small ones – in demand someone along the supply chain cause a domino effect of problems along the entirety of the supply chain. The result is that too much or not enough product is purchased at all the levels of the chain. For example, with third-party suppliers and OEMs increasing the amount of inventory they carry, there is a risk that some slight change will cause them to lose money on the stock.
I’m not an expert in supply chains, and I don’t have a crystal ball, but everyone in the manufacturing sector is seeing the same thing. There is a lot of volatility and uncertainty right now in the global supply chain. If you have a piece of equipment that is critical to your operations – one that if it goes down, you won’t be able to perform your business functions – you need to talk to your suppliers to understand what their current lead times are. Make sure you have the right number of spares on hand, because you might not be able to get them overnight. If you have a new plant or process coming online, make sure all your quotations for pending equipment are up to date. Whether it’s a computer, or a lab bench, or a valve, a disruption can happen anywhere.
So far, Cambridge Viscosity has done well with managing our supply chain, and we continue to keep a close eye on conditions. If you have questions or concerns, or just want to talk to one of our application engineers about the spare parts you should have on-hand, fill out the form and we’ll get back to you asap.
