Lack of Supply Chain Resilience Causing Inflation Crisis, Says OCI CEO
UK inflation is now running at 9.1%, in the US, it is at 8.6%, and in the euro area, it stands at 8.1%. Supply chain shocks, possibly in combination with too loose monetary policy, are the underlying cause of current inflation surge, said OCI CEO Oliver Champan.
"But the worst effects of this crisis could have been avoided if organisations had put in place basic procedures in understanding and improving their supply chain," he added.
Mr Chapman explains that "lack of resilience and redundancy embedded into supply chains, encouraged by too much complacency, helped make the supply-chain crisis much worse than it needed to be."
Mr Chapman draws a parallel with a data centre. In such a place, "Resilience and redundancy can withstand shocks or unpredictable events - is vital. It is understood that a data centre must run 100% of the time, including during power cuts or terrible weather conditions."
Mr Chapman adds: "For too long, the supply chain operation has been taken for granted and ran on the assumption everything would go just right, with every interweaving part of the supply chain fitting just right, all the time.
"Now we are paying the price for such complacency." He says, "If supply chains had seen more redundancy and resilience built into them in the first place, there would still be a rise in inflation, but it wouldn't have been so severe."
"To defeat inflation in the medium and longer-term, we must avoid second and third round inflationary effects. It is mission critical that organisations learn the lesson of the current crisis urgently, instigate a detailed audit of their supply chain and introduce more resilience and redundancy."
Resilience in the supply chain involves:
* Increasing the ability to absorb shocks;
* Redesigning the global network;
* Setting new parameters for supply chain buffers;
* Proactively managing suppliers;
* Reacting faster when disruption occurs;
* Managing the multi-enterprise supply chain.
Redundancies throughout the supply chain act to:
* Support any weak spots in the supply chain;
* Prevent slowdowns or shutdowns;
* Provide safety stock in case of delivery failures or losses;
* Ensure competition, availability and design quality when redundancy of suppliers is implemented.