The role of scarceness in supply chain management

One of the important tasks of supply managers nowadays is being cautious about making wrong expectations about the abundance or shortage of a needed resource: in the coming decades, they must take strategic decisions about the best way for matching supply and demand. All kind of organizations should make right assumptions about the current status of the basic resources they need for manufacturing. For instance, a manager might consider that a resource’s demand (let’s say, iron) is quite standardized, and maybe it may match with any type of supply. Nevertheless, the manager might have an unexpected surprise: maybe just a particular grade of iron can actually be used… and the current scarceness status of it is lower than he / she assumed. In addition, if a supply manager doesn’t evaluate the way forces are constantly changing the current status, he / she might not realize that those forces are directed on the road to a possible scarceness future situation.

In a similar way, the viability of a product (or the company itself) can be seriously affected if someone designs a product that requires a natural resource that the manager did not know how scarce it was from the start. That kind of issue can’t be solved just by paying money for turning consequences less bad: a company must undercut its investment thanks to a future discovery of new higher deposits, and before that, it may amass a resource before it grows scarce in the market and in nature. For that reason, companies should gather more evidence about possible scarceness for their resources and, subsequently, to build improved processes for taking strategic choices about the scarceness of any resource, in order to prevent production disasters, and, of course, to diminish shortage risks.

How can you mitigate the short-term price changes that follow scarceness? There are ways to do so: to substitute resources (if possible), discovering new sources or the improvement of technology. Yet, there could be technological and environmental limits that should not be crossed for diminishing scarceness in the long term. Several companies and corporations abroad are becoming more aware of the increasing shortage problem and are getting prepared for the tough coming times. In addition, a lot of design engineers have started to write about the technical complications related to design and manufacture of new goods and services with scarce obtainability. Tungsten (or wolfram), for example: a rare metal which is needed for the production of cellphones and other electronics.

Supermarket_scarcity_supply chain management_david kiger
Image courtesy of N i c o l a at Flickr.com

The projection of global supply of some resources at the actual consumption rate is ten to twenty years. The problem is that the rest of the world may increase the consumption to maybe the half of the country’s consumption rate, so the supply could possibly be cut to lesser than 10 years in this case. The question is: are managers thinking about it? The illusion of an unlimited resources planet can’t be no longer present in our minds: everything has a limit, and we all should operate on this basis. It is impossible to keep producing electronics, machines, vehicles, tools, etc. with a shortage of metal and plastic supply, for example.

So, when it comes to scarceness of the necessary subcomponents for manufacturing products or providing services, there are basically three recommendations. They are general and may be implemented in different situations:

In first place, supply managers should be aware about the quantity and quality of the needed resources for producing the products they sell and then evaluating the scarceness status of all of them. Managers could trace the supply chain of those products to raw-material levels in order to discover supply risks they were not considering. Resource insufficiency can directly disturb the supply chain practices of the development of products, also the management of supplier relationship and manufacturing movement.

In second place, the shortage of resources in production is an ever-changing aspect to think about. In consequence, the sourcing functions businesses, now and in the future, should think about spending money, time and energy researching and monitoring the scarceness changes in the market and nature. It will help supply managers in the evaluation of demand and supply risks that may occur, and, of course, they will be able to open new opportunities for their corporations. Creating a competitive advantage thanks to being ahead of scarceness tendencies is a proactive attitude that all companies should implement in the current times.

Finally, supply managers should invest in opportunities through the creation of smart supply strategies that allow them being ahead in the keen competitive market. Companies should create strategies in the long run in order to respond to the increasing shortage levels, by the design of products on available resources (or by the replacement of them). The only way to do so is by working together with their supply chain partners. In addition, supply managers could modify the design of their supply chains for the subsequent building of logistics. That will certainly ensure that the produced goods keep sustainable along their life-cycle.

The increasing resource scarceness will play an important role in the industrial business over the next twenty years. In consequence, supply managers should stop thinking in short-term issues and, instead, think and invest in long-term risk management proactive strategies.

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