Three reasons for the raw material shortage

Due to the corona pandemic, production of raw materials and materials has fallen. Especially in China, which is the main producer of microchips, there is a large backlog. Closures of container ports in Asia have also affected the shortage. Finally, there has been an increased demand for goods rather than experiences, which has further increased the pressure. It is therefore the combination of increased demand and reduced supply that has helped to create this extraordinary scarcity of raw materials and materials.

However, there are signs that the crisis is easing. The total production is e.g. greater today than it was before the pandemic, and as the world reopens, it is expected that consumer demand will shift back towards experiences and away from e.g. home improvements. Since experiences, travel and concerts have a low raw material content, it is expected to put less pressure on raw material demand.

The corona crisis has accelerated digitization, so there is no doubt that there will continue to be a great demand for electrical products. The increased sales of electric cars also means continued increased demand for microchips and electronic components.

Source: https://www.danskindustri.dk/arkiv/analyser/2021/10/ravaremangel-forsinker-leveringer-med-to-maneder/

Companies have taken a new view of their supply chain

According to SCM.dk means i.a. the corona crisis, that companies have taken a new, more critical view of their supply chains. There are three things in particular that are focused on:

1. A robust supply chain. A more robust supply chain also means less flexibility. So it is important to find the right balance.
2. Digitization. But with an eye on growth, financial stability, cost and risk management.
3. Need for new skills. In line with increased digitalisation, companies need new skills. Either by hiring new workers, or by upskilling current ones.

5 ways the supply chain has changed due to Covid-19

In addition to a new critical view of the supply chain, the crisis has also meant that it has changed. Here are five things that according to weforum.org has changed due to the crisis.

1. The supply chain is an important focus area for top management

For the first time ever, companies report that supply chain chaos is the biggest threat to the company's and their country's economy – even bigger than the pandemic itself, labor shortages or geopolitical unrest. You can probably easily say that the supply chain manager is the new star in the management corridor.

2. Continuity is more important than cost

The corona pandemic threatened the survival of several companies, which is why the focus has shifted from price reductions and efficiencies to ensuring the company's survival through a focus on robustness and flexibility.

3. The buyer-supplier relationship has changed

The lack of e.g. microchips mean that companies enter into strategic partnerships with manufacturers and suppliers. Furthermore, there is a general understanding that resilience is impossible unless companies, suppliers and other stakeholders are willing to share data and collaborate.

4. Creative supply chain solutions will become the norm

Businesses can no longer sit back and wait for supply chain issues to resolve themselves. More and more organizations are starting to think creatively. No containers available? We build our own. No space on the cargo ships? We charter our own. Flexible companies have to adapt to the new conditions.

5. Stock management has to change

After decades of working to streamline production, the low inventory has become a problem. Companies moved away from just-in-time (JIT) systems to bet on a larger inventory, and over-order goods, in order to be able to produce and deliver goods later.

One thing is certain: two years after the corona virus appeared, supply chains are still struggling with an unfortunate series of problems: great supply uncertainty, record high freight prices and empty warehouses.

As I said, there are signs that the crisis is easing. When that happens, we should create a more intelligent supply chain.