NewPower suggests buyers start protecting their supply chains from an economic downturn that could rival the 2008 financial crisis.
Electronic Sourcing, March 2022 –
The circumstances of an economic collapse have been building as the economy’s outlook remains uncertain. In 2020 overall demand plummet as the Covid-19 pandemic kept everyone in hibernation. Many businesses had mass-layoffs, and others were forced to close.
Federal Governments across the globe invested large amounts of cash into their economies in an effort to keep people afloat. This cash also set the stage for unprecedented demand. Cloud-based/stay-at-home services drove a steep incline in demand and the trickle-down effect of people staying home and isolating created a labor shortage.
The pandemic highlighted the imperfections in the global logistics system, leading to wider spread issues. Supply chains were thrown out of sync globally, causing product shortages and price increases for transportation and storage capacity. Companies around the world are dealing with these very issues today.
This situation is leading global economists and supply chain veterans to contemplate the recession-like effects of a bullwhip and what it would do to the world’s leading economies. Historically, recessions are typically triggered by a massive increase in demand, almost exactly like what we’re experiencing now.
An increase in demand coupled with companies struggling to manage through it with supply, logistics, pricing, labor, etc., is causing businesses to place huge orders with distributors to ensure supply. As a result, distributors are placing even larger orders with manufacturers to make sure they have the inventory to support further forecasted demand. Uncertainty of product availability and delivery times are also at play.
In the end, orders and inventories are overdone at every step in the supply chain, creating an overinflated result. Demand for products will most certainly drop as the pandemic wanes, and when that happens, orders will also drop off tremendously. Companies will desperately try to offload bloated inventories, and the impacts on organizations will only worsen moving up the chain. Similar to 2008’s financial crisis, the sudden decrease in demand will cause significant company issues and job losses.
However, companies can act now to avoid the impacts of these impending issues. Businesses need to identify their critically important suppliers and monitor them closely, specifically investigating their financial health. They may be frightened by what they learn and realize the need to do more than contemplate financial methods to ensure essential suppliers can survive a recession-like period.
Forward-looking companies have already begun thinking about surviving and thriving in such an environment. Throughout the pandemic, these companies have streamlined their supplier base. For other companies to make it through, now is the time to establish supply chain control and transparency.
For example, inventory management solutions, like those offered by NewPower Worldwide, are designed to minimize supply chain issues and related challenges encountered if a recession impacted their supplier base. Controlling inventory and stabilizing the supply of electronic components ensures an organization thrives in an uncertain future.
For more information about NewPower Worldwide or to find out more about its services, contact:
NewPower Worldwide, LLC
107 Northeastern Boulevard, Nashua
603-718-8189 | www.newpowerww.com