The Supply-Chain Crisis is Not Over Yet: The Approaching Second Wave

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Global supply chains have faced significant hurdles as a result of the COVID-19 pandemic. Those anticipating for a rapid change to the supply-chain crisis will be highly disappointed. Port back-ups, trucker and raw material shortages, and industrial closures, contribute to the current wave of the crisis. However, a second wave is approaching. This wave will be more challenging to identify, and too many businesses are concentrating merely on the current crisis, without preparing themselves for the potential dangers that lie ahead.

 

During the pandemic, public and commercial firms worldwide mitigated short-term risk by adding cash and debt to their balance sheets. Despite taking this step, many people took on more danger in the long run.

Companies’ underlying businesses may recover while the cash is available, but they will need to obtain more liquidity to purchase more time if they do not. If firms cannot manage their debt issues, they will either fail or cut corners, causing concealed concerns for their clients.

 

A supplier’s financial failure is never good, but it is usually apparent. A supplier’s deterioration can be subtle, creating risks that are harder to identify yet costly and highly damaging¬†to its clients.

The second wave of the supply-chain crisis will arise from suppliers who have been detrimentally affected by the emerging challenges. It will happen when businesses can no longer use inexpensive and traditionally easy-to-access cash to fix the flaws.

If a supplier cuts down on IT spending, Customers’ cybersecurity may be jeopardized. One that delays products or cuts R&D spending is less competitive and responsive to the development and agility of a customer’s own product. Companies across industries have been raising funds since March 2020 to avoid business failure or to rectify operational damage caused by Covid-19 and the first wave of the supply-chain crisis.

 

According to our experience assessing public and private organizations from 150 countries, private companies make up 75 percent of the average Fortune 1000 company’s supply chain, regardless of industry.

Fortunately, supplier collaboration has become one of the most critical trends in supply-chain risk. Supply-chain risk professionals who engage with suppliers to understand about their financial health are best placed to mitigate problems and establish the most resilient supply chains possible.

 

However, there is still work to be done. Many of these professions may require additional resources and assistance. Shareholders will be scrutinizing those in charge of the narrative of their organizations’ supply-chain risk-management plans in 2022.¬† While risks cannot be removed in and of themselves, they can be mitigated. Comprehending what these risks are, especially when a second wave approaches, is essential. The sky isn’t falling today, to be precise. Supply chain risk management, on the other hand, must look upwards.