An international supply chain is a tricky thing. 2019 taught us geopolitics can be a hugely disruptive force to a smoothly operated supply chain. 2020 has taught us global health emergencies and the economic consequences of those emergencies can be even more disruptive.
Firms make choices when they decide to source globally. Resiliency to production shutdowns, transportation meltdowns, and demand fluctuation is often assumed but not planned for. Consumers cannot buy if firms cannot produce and transport to market. A shift in thinking is occurring from just-in-time precision to not just safety stock necessity, but sales growth opportunity. COVID-19 is changing the way the cost of carrying inventory is conceptualized in the C-suite. While not inexpensive, inventory became king in 2020, and the anticipation should be the same for 2021. Further degradation of ocean network reliability, along with variable, quickly changing demand patterns, will force a costly choice to be made.
These costly choices around inventory are made more impactful due to the unfortunate inability of some of the global transportation infrastructure to adapt to the needs of globalization. Most visible to importers in the United States is the continued, severe congestion that plagues our port/terminal complexes. There are several stakeholders in an international supply chain, and each has responsibility to the others. The continued resistance to automation within our port/terminal complexes, a systemic lack of investment in critical infrastructure required to handle volume surges, and a reluctance to share critical data needed to play more nicely together will hinder and slow down our ability to recover and grow the economy.
I’m hopeful 2021 will usher in a more cooperative tone within a wide-ranging set of industry and governmental stakeholders. Without more timely action to address our infrastructure needs, our economy will suffer the burden of our collective inaction.