Excess inventory may be in focus, but climate change, geopolitics and structural supply chain challenges continue to threaten some goods.
While firms today might be more worried about the possibility of inventory pile-ups than product scarcity, the age of port congestion, empty shelves and toilet paper shortages is not far behind us.
Risks beyond the pandemic abound — political, economic, environmental, financial and more.
“If 2023 was the year of ‘what’ in terms of what the problem is or what the challenge is, in 2024 we’re going to start getting into the how’s and then actually doing it,” said Simon Geale, executive vice president at procurement services firm Proxima. “I think we’re going to see quite a lot of progress on localization, reshoring and resilience in the early part of 2024.”
Despite the scars of the pandemic, the sharp swing from high demand and product scarcity to overabundance of inventory and weak spending have renewed longstanding priorities around cost and profit margins.
“Currently, there is a strong focus on cost management and cost insulation to protect profitability. Most companies try to avoid a holistic transformation of their supply chains,” said Philipp Oemler, a managing director with FTI Consulting.
At the same time, Oemler thinks attitudes have changed in organizations since the pandemic brought widespread disruptions to supply chains.
“From my point of view, there is a mind shift,” Oemler said, noting that since the pandemic “people came to the conclusion that the supply chain is one of their strategic forces and that they need to secure it. The pendulum is going more to the direction of cost, but still there is still a mindset of resilience.”
And there is cause for a resilience-mentality. Circumstances and systemic challenges continued to put pressure on supplies of some key commodities, while other hard-to-predict risks could create shortages no one can foresee with perfect accuracy today.
Here is a look at where shortages might strike in 2024:
Pharmaceuticals and medical supplies
Mario Villafuerte via Getty Images
Shortages of certain medicines continued to plague hospitals and providers through 2023, and many of the underlying dynamics have not been resolved.
The Food & Drug administration still lists shortages for some cancer treatments such as carboplatin and cisplatin — which have caused astronomical price spikes. Those are in addition to dozens of other medicines in short supply.
Stocks of some medical machinery have also been under strain. Supply disruptions for both devices and treatments have caused surgical cases to be rescheduled, postponed or canceled, according to a 2023 survey by the patient safety nonprofit ECRI and the Institute for Safe Medication Practices.
In the medical device space, many of the supply chain issues are upstream from manufacturers.
“When I’m working with medical device companies — with nine out of 10 — the question is: ‘How do I increase the stability of supply for my suppliers,’” said Rick van der Vegte, a senior managing director in FTI’s life science practice. “You cannot switch suppliers that easily and quickly in the medical device space.”
Supply disruptions can be exacerbated by the long lead times in manufacturing supply chains for both medicines and devices, van der Vegte noted. Mitigating those risks also takes time. Finding and onboarding another qualified supplier can take at least a year, he added.
Given the time it takes to bring in new suppliers, assessing and addressing risk early can potentially head off disruptions. Van der Vegte pointed to a European medical device company he worked with to conduct a full risk assessment on its supply.
“We found out that most of these risks could be eliminated by either changing contracts or by identifying alternative suppliers,” he said.
Article top image credit: Sean Rayford via Getty Images
