Local materials, labour would help some Sask. businesses survive supply chain crunch, says professor

·4 min read
Supply chain issues are mostly caused by international factors such as factory and shipping capacity, says a University of Saskatchewan professor.     REUTERS/ Alan Devall (Alan Devall/Reuters - image credit)
Supply chain issues are mostly caused by international factors such as factory and shipping capacity, says a University of Saskatchewan professor. REUTERS/ Alan Devall (Alan Devall/Reuters - image credit)

Store shelves might not be empty, but consumers should get used to seeing fewer varieties of toys, soft drinks or sports cars, says a University of Saskatchewan professor.

Keith Willoughby, dean of the U of S Edwards School of Business, says companies should also consider using more local materials and labour as protection from the growing supply chain crunch.

Willoughby spoke this week to CBC reporter Jason Warick. This conversation has been edited for length and clarity.

CBC: There's been a lot of talk about supply chain problems — businesses here in Saskatchewan, from food stores to ski shops to car dealerships, having trouble getting the items they need. Why is this happening and do you expect it to get better or worse?

Willoughby: It's the combination of a number of factors. Obviously the pandemic is impacting both demand and supply. We've seen demand for some products has increased, whether it's household commodities, whether it's back in the days early on in the pandemic with lumber sales, bicycles, appliances. On the flip side, we've also seen supply challenges, whether it's access to factories, if it's access with with trucking lines or shipping lanes.

So it's the confluence of a lot of factors that are coming together to produce heightened demand and supply challenges, which is creating the supply chain problems.

Do you have a sense of how much each of these factors is to blame? Truckers on the convoy to Ottawa say international travel restrictions for unvaccinated for truckers will be the primary supply chain issue. But others say inflation. Others say trade issues with Asia. What are what are the big ones here?

I think at its core it's the pandemic, and challenges we see now with getting product to market. I think inflation is an outcome, not a contributor to the supply chain challenges we're seeing. So we're seeing higher prices that consumers are being expected to pay to buy items.

I think all along, organizations have developed a "just in time" system, which works well. But then you get hit by this tsunami known as the pandemic, and then it's suddenly really exposes a lot of our vulnerability to supply chain challenges. When demand begins to increase and when supply ends up being challenged, we end up with this this terrible crunch, which impacts a lot of us here in this province.

But when you say supply is affected by the pandemic, is it that, say, a factory in Asia? Or is it in shipping? Or delays at the border? Or that we can't find enough workers at a store in Saskatoon? What are the big problems?

A big problem that we've seen from early on in the pandemic is access to factories in Asia. Factories may have had to curtail production of key items.

Combined with that, we've seen shipping delays where the shipping companies have had to select which products to transport using their resources. Access to those those shipping channels, those modes of shipment that are going to get product from warehouse into distributors and stores here in Canada. So the supply chain challenges, I think, are created more, I'd say, offshore.

Do you see the situation getting better or worse?

I think it's on everyone's mind. Supply chains are resilient, inherently, they are able to respond. The challenge is I think people need to modify their expectations. Pre-pandemic, we fully expected to see full shelves of everything. Now we see limited availability for some products, so companies have had to select. Maybe they can't produce all the varieties of soft drinks or other products, so consumers need to modify their expectations.

It hinges a lot globally on where we're at in terms of the pandemic.

You mention being reliant on these supply chains that are often international. Is that a vulnerability that that's not going away?

That's not going to go away. Those international factories have become the supply points for many of the products we have. I don't view that changing overnight. There has been decades of experience and the infrastructure built up that have enabled us to be in those situations.

I think that in as much as organizations can do it, where they can adopt more local approaches to supply connectivity, it reduces your exposure to some of these vulnerabilities. I think that would be a prudent approach. It may come at a cost increase, but it provides you with greater supply certainty.

Is there anything else you wanted to add?

Everybody's got a plan until they get punched in the mouth. That was [boxer] Mike Tyson's quote, and I often think that that's what we've seen with the supply chain. With the pandemic, we've been hit by a tsunami, if you will.

This will be about expectation management, and the ability of suppliers and companies to be prudent, to investigate local sources or more local sources of supply. It may come at a cost increase, but they need to balance that with the access to supply, which could be important for their customers.

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