Michael Zimmerman, partner with Kearney, reveals the key findings of the 33rd State of Logistics Report, sponsored by Kearney, Penske Logistics and the Council of Supply Chain Management Professionals.
The State of Logistics report has been published annually for 33 years, with the Kearney consultancy participating, in collaboration with Penske and CSCMP, for seven years. But the latest version describes a unique situation. “Logisticians are recovering from the worst conditions in history,” says Zimmerman. “Supply chains have been buffeted by the pandemic and stimulus — the bullwhip effect on steroids and adrenalin at the same time.”
With the pain has come many lessons learned. “Most international supply chains are completely rethinking how they should design them going forward,” Zimmerman says. “There’s going to be more risk-taking than we’ve seen in the past, more innovation.”
The emphasis for the past 20 years has been on keeping down costs and waste through such techniques as just-in-time and Lean inventory strategies. But more recent disruptions, including trade disputes, natural disasters and war, have caused companies to address the risk of single-sourcing from low-cost producers.
Ironically, by diversifying supply, companies engender another kind of risk, in the form of additional cost. And JIT is far from dead as a means of minimizing inventory expense. Nevertheless, companies need to redesign supply chains so as to make them more resilient to disruptions in particular parts of the world. In addition, they’re more willing to keep some extra inventory on their books — or those of a vendor partner — to make up for sudden cutoffs of supply.
None of these changes will happen overnight. Movement in that direction is “fairly slow,” says Zimmerman. Still, COVID-19 and other disasters have served as an “accelerant” to change, and at this point in time it could be even riskier for companies not to take corrective action.
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