The severe shortage of computer chips – semiconductors – has been causing major supply chain disruptions, leading most automobile makers globally to ramp down production levels and even close factories for short periods.
Supply Chain Digest Says...
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| Vakil says companies with superior “early warning systems” that can identify incipient supply constraints can achieve first mover advantage. |
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Similar woes have hit a number of electronics makers as well.
Now, it’s time for gird for a new major shortage – of plastics, one expert says.
In a recent guest column in the Harvard Business Review on-line, Bindiya Vakil, CEO of Resilinc (see photo below), a provider of supply chain-mapping services and risk-monitoring data, commented that “Constraints on the supplies of their raw materials - especially polyethylene (PE), polypropylene (PP), and monoethylene (MEG) - are leading to factory shutdowns, sharp price increases, and production delays across a range of industries.”
Given the heavy use of plastics in products and packaging across virtually every sector, this is a really big deal, as consumer and business demand continues to ramp higher in a surging economy.
How has this shortage happened?
Vakil says that during mid-2020, Covid-19-related lockdowns caused inventory levels to fall. Following that, Hurricane Laura forced a number of petrochemical factories in Louisiana and Texas to shut down in August.
That immediately halted 10% to 15% of US PE and PP output.
Right after that, LyondellBasell in Louisiana and Chevron Phillips Chemical in Texas declared force majeure, allowing them an out for some delivery commitments due to circumstances outside their control.
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 Then came the unprecedented winter weather that hit many areas of Texas hard, especially the Gulf Coast, home of world’s largest petrochemical complex, which turns oil and gas and other byproducts into plastics.
Vakil says that nearly 100 critical chemicals and derivatives used widely across many products and industries are processed in Texas, and that the plant shutdowns in February will require more than six months to correct the resulting supply imbalances.
In the end, Vakil says companies with superior “early warning systems” that can identify incipient supply constraints can achieve first mover advantage in terms of identifying alternative sources of supply or taking other mitigating steps. [Note: Resilinc offers products in this area.]
“Many companies also make the mistake of paying close attention only to their direct suppliers and not to their suppliers’ suppliers,” Vaki notes, adding that “Best-in-class companies take time to identify the suppliers’ suppliers that are critical to the continuing production of their top revenue generators and proactively map, monitor, and protect those entire supply lines.”
She concludes that “In this environment, companies that are better prepared to act quickly have a competitive advantage.”
What do you think of the current plastics shortage? Do binguyers need "early warning systems?"Let us know your thoughts at the Feedback section below.
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