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The Supply Chain Conundrum

There is a serious supply chain crisis that continues to disrupt many industries and the foodservice consulting industry is not immune from this.  The pandemic has negatively affected the foodservice equipment supply chain from manufacturer to end user.

How does the foodservice consultant deal with this?  What strategies should we implement to efficiently source materials and equipment for your project?  How do we cope with rising costs, lack of product, indeterminate delivery time frames as we all navigate the supply chain conundrum?

Dealing with the Supply Chain Crisis – What’s the Problem?

The most notable problem we face currently is the frustratingly long lead times for equipment that we have specified and the subsequent issues this causes in terms of adherence to the design schedule.  It used to take about 4 weeks to receive a piece of equipment.  It has increased to 8 weeks if you are lucky; 16 weeks isn’t out of the realm of possibility.  What is causing the delay?  There is no single what.  There are a collection of issues causing a domino effect and resulting in delays and backorders.

Global Sourcing

Equipment, even those “made in America,” are made with parts sourced globally and those parts are taking longer to get to the production line due to shipping container shortages, the unavailability of the desired part, or pandemic-related reduced operations capacity by the parts manufacturer or the shipping company.

Supply and Demand

Raw materials are in low supply and high demand, creating inflated costs which drive the end product’s price higher.  Add to that the fact that there is a hefty price increase on the shipping containers.  The Asia-US West Coast container prices increased 4% to $6,861/FEU (Forty Foot Equivalent Unit), a rate 178% higher than the same time last year, and the Asia-US East Coast prices climbed to $10,002/FEU, a 215% increase compared to rates for the same time last year. (AJOT)

Non – Negotiable Delivery Dates

James Lee, a spokesperson for James Worldwide, a freight forwarding service company, and colleague of mine, explained that the biggest challenge for all the members of the supply chain is not knowing what is going to happen. There is no negotiating on the delivery dates and how many containers to ship. “Once you start to negotiate, you will miss your turn and wait another 4 weeks to get your turn back,” said Lee.  He also mentioned, “Last year, manufacturers and dealers started to change their purchasing patterns by buying 2 months of supply at a time rather than buying 10 days at a time.”  Today, you are at the mercy of the shipping container company and their scheduling.

Think S.M.A.R.T.

The crisis will undoubtedly end.  But when and at what cost is the big question.  Forecasts indicate that disruptions will impact the supply chain through next year.  So, how do we implement effective strategies to neutralize the situation and create workable solutions?  We need to think S.M.A.R.T.:

SPEED

Given the parameters of long lead times and equipment delays, it might make sense for the project team to put the equipment package out to bid earlier in the project timeline.  With this preemptory strike, unavailable equipment or equipment with questionable delays can be taken out of the design equation and revisions can be made to incorporate available equipment without jeopardizing the overall facility design or the client’s needs.  This proactive approach will not only save on schedule delays but also will allow the project team to stay on budget.

MANAGE

As the project team collectively and independently manages their portion of the project, it is essential to continually ask ourselves supply chain questions throughout the duration of the project.  Some questions might be:  Do we have enough visibility of the equipment’s supply chain to properly assess the overall impact? Did we explore our alternatives? Do we know which equipment will potentially be impacted?  How will alternatives impact our design, if at all?  Will the cost of the project be impacted?  Will there be disruption to the goals of the project?  How can we effectively design without compromise?  Today, supply chain leaders are reassessing their new realities and trying to forecast what the future may bring. It is time for us to do the same so that there is a Plan B to avoid supply chain problems when they crop up.

ACCURATE

It goes without saying that accuracy is imperative in most situations, especially in the design industry.  Imagine what could happen if building specs weren’t quite accurate.  Accuracy doesn’t happen by chance.  Among the obvious skill of expertise within your discipline, it also takes knowing your project inside and out, being able to anticipate issues before they become a serious problem and having alternate solutions in your back pocket.  When supply chain disruptions occur, accurate information and advice shared with the entire project team is essential to the project’s success.

REMAIN FLEXIBLE

We might not have any problem today, but tomorrow, we might have a big challenge waiting for us.  While we can’t control getting unfortunate news about equipment backorders or delays from kitchen equipment companies, we can stay prepared by consistently and continuously keeping tabs on which manufacturers are experiencing disruptions and where our specified equipment is in the process.  The earlier we discover a problem, the sooner we can address it and find a solution.

TRUST

We can complete the project on time and even on budget if we plan ahead, stay flexible and utilize effective strategies to offset problematic supply chain issues.  But equally important is the trust between all project team members.  Open and direct dialogue in the kick-off meeting about how to deal with potential supply chain issues will foster effective contingency plans should the need arise to use them.  Collaborative strategies will enable the project to move forward without the burden of endless redesigns.

The Finish Line

Supply chain disruption isn’t a new phenomenon.  Lots of factors play into this current conundrum we all find ourselves in and it can wreak havoc on the best project plans.  But by thinking S.M.A.R.T., effective strategies can move your project to the finish line on time and on budget, making it a win all the way around.

By:  Daniel Kwon, Project Manager | Atlanta

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