5 Strategies for Navigating Long Lead Times and Material Shortages Posted on June 23, 2021June 23, 2021 by Border States Note: For the latest information on lead times, freight and pricing, see Border States’ COVID-19 monthly supply chain update. Long lead times are frustrating for everyone in the supply chain. From the raw material supplier to the manufacturer to the distributor to you, no one benefits when materials take longer to arrive than desired. But the supply chain is complex, and change happens quickly. To function smoothly, each part of the supply chain must work to manage internal and external variables. At Border States, we’re doing everything we can to get your materials to you faster. And in this article, we’re sharing what you can do to make the process as smooth as possible. What causes long lead times? First, it’s important to understand what causes disruptions in the supply chain. The exact cause of a long lead time can be hard to pinpoint, but a few factors usually play a role. 1. Increased demand for raw materials As technology evolves, demand for specific raw materials can grow. Copper, for example, is poised to increase along with electric vehicle adoption and infrastructure improvements. In 2016, McKinsey, predicted that demand for copper could jump 50 percent over the next 20 years. If you already use products with copper, such as insulated copper wire, you may feel the ripple effects of these changes. Unfortunately, the supply of raw materials doesn’t always keep up with the pace of demand. 2. Skilled labor shortages Like many industries, manufacturers are suffering from a shortage of skilled labor. With 25% of manufacturing workers over age 55, one of the top concerns among manufacturing firms is retirements in their workforce. When labor is scarce, a slight change in worker availability can make a big impact on the rest of the supply chain. From strikes to COVID-19 scheduling challenges, labor supply changes can cause weeks of delay. 3. Shipping disruptions The transportation sector ties all the pieces of the supply chain together. Even if raw material and labor availability aren’t a problem, shipping disruptions can drastically increase lead times. For example, as countries began to ease COVID-19 restrictions, ocean freight capacity struggled to keep up with the new demand. This caused shipping container shortages and extended wait times at ports — and as a result, longer lead times. At the same time, the LTL (less-than-truckload) and FTL (full truckload) markets were already experiencing a driver shortage when the pandemic hit. Strong demand for consumer goods and extended lead times on new commercial vehicles have made capacity challenges even harder. 4. Demand exceeding supply Another effect of the COVID-19 pandemic was that demand returned faster than the market’s ability to supply material in certain segments. While demand and supply will balance over time, the industry is seeing short-term pressures and challenges in meeting project needs. These effects will likely last at least through the end of 2021. These supply chain challenges won’t disappear anytime soon. So, what can you do in the meantime? 5 Helpful Strategies for Navigating Long Lead Times 1. Communicate material needs early. If you know you’ll need material for a job or project, communicate the date you’ll need it as soon as possible. As a distributor, this helps us prioritize material when supply chain constraints occur. You can also look at your historical data to plan for upcoming reorders. Talk with your account manager about any materials you want to make sure you have on hand. 2. Place small, frequent orders. Ordering everything you need all at once seems like a good way to guarantee you’ll get material. However, since bulk orders take longer to fulfill and ship, a large order can increase your lead time. Rather than stocking up all at once, we recommend making smaller and more frequent orders. Stay in touch with your account manager to make sure you’re on the same page. 3. Be open to alternate manufacturers and materials. Sometimes, lead times can vary significantly between different manufacturers. If your distributor knows they can source from multiple manufacturers, you may be able to get your material faster. It’s important to let your distributor know if you’re willing to use an alternate manufacturer or material. This gives us the flexibility to find the best solution amid supply chain constraints. 4. Use standard components when possible. Standard components are less likely to be affected by supply chain issues because they can easily be sourced from multiple manufacturers. This allows you to choose the components with the shortest lead time. So, if you’re designing a new system, using standard components is a great idea to prepare for future long lead times and reduce costs. 5. Try automated inventory management. Handling orders via manual processes increases the risk of error. And when you’re faced with extended lead times, these errors can’t be solved quickly. With an automated inventory management system, you can seamlessly track purchase orders, stock levels, sales data and carrying costs. When your stock runs low, the system can reorder supplies automatically. Staying ahead of long lead times Navigating long lead times and material shortages isn’t easy, but you can reduce uncertainty by working with a distributor who’s committed to your organization’s success. You may not be able to change what happens further up in the supply chain, but you can influence the variables within your control. That’s the secret to staying ahead of the competition.
