3 minute readTwo critical forces won’t behave as people want them to, at all.
Covid and the global supply chain, including the supply of 18,000 piece-level materials and products needed to assemble a new home.
Some view the misbehavior as defying prediction. Others looked, starting last Spring and flowing through this past late-Winter, and predicted exactly what’s going on for both – a fourth wave of Covid cases and deaths, and a massively disrupted building materials and products supply chain that will blow well past the end of 2021 at least into the middle part of 2022.
Some, according to
A productivity shock—such as the one induced by COVID-19—can ripple through the supply chain network. The introduction of a shock to industry “A” is represented with a red circle on the left-hand side. The transition from left to right, or from partially blue to all red, exemplifies how productivity losses to one industry can lead to similar losses in connected industries.
Accepting that supply disruption will be lasting, and may get worse – in terms of both material availability, timeliness, and cost – before it gets better stands as a very difficult pill to swallow, particularly in a business and manufacturing culture whose workaround to critical path and scheduling challenges tends to be to throw more money at the problem, or move past the critical path item and plan to come back to it later – even if the loss of sequence runs costs higher, and even potentially impacts quality.
It’s a widely known fact that one of the last options many homebuilding organizations would resort to is exactly the option many supply chain strategists insist would be the best route.
Farida Ali, ceo and president of Dynamic Technology Solutions, writes:
In the current manufacturing environment — where no clear standards exist for what is and what is not acceptable supply chain risk — relationships need to be developed that define and formally align the interests of the purchaser and the supplier. Investment of time and resources are required to establish that type of high-level, non-transactional support from suppliers. Those relationships must also be based on trust, so that suppliers are comfortable sharing potentially negative information with customers.
For meaningful change to occur in the management of supply chain risks, the underlying dynamics of the company-supplier relationship need to shift to proactive “pushing” of critical information by suppliers to manufacturers and away from the reactive “pulling” of information from suppliers by manufacturers. Companies must expect all suppliers to have skin in the game and require them to identify and keep them informed of potential risks.
Fourth quarter of 2021 will be a tsunami of Extra Purchase Orders, Variance Purchase Orders, Field Purchase Orders.
Who’s on the hook for them? Who takes the hit?
Is it the promised, up-to-now mightily handsome margins builders have been mapping into their year-end forecasts, albeit on fewer than anticipated completed sales?
Who’s on the hook?
Is it the field supervisors, the local purchasing folks working their brains to come up with that day’s five workaround solutions? Is it the division managers and presidents who’ll take a hit to their bonuses for not making their numbers?
Will the pain spread across the enterprise line into relationships with vendors, showing up as punitive measures in light of Covid-related delays that triggered a daisy-chain of expensive work-arounds?
Trust and transparency. These go-to values are baseline options, good times or bad; especially bad. Trust and transparency will be the way to build back stronger and better and faster once things do ease up in the supply channel.
