You’ve probably felt the impact of supply chain shortages during the pandemic. Brought on by a shortage of workers and volatile customer demand, global supply chains have been hit hard by the pandemic and its after-effects. The result: rising costs and shortages, which some predict will continue into 2023.
The lighting and solar industry has not escaped the effects of supply chain issues. Although solar is predicted to be the power of the future, current manufacturers, businesses, and consumers are struggling to get their hands on raw materials and finished products due to supply chain issues – some companies even announced price rises in both Q1 and Q2 this year to meet the growing cost of materials. But what is causing the issue? And how can the lighting and solar industries make strategic adjustments in response to burgeoning supply chain issues?
Supply chain issues rarely occur in singularities. Supply chain managers around the globe are adept at making small changes to ensure parts and products are delivered on time or with minimum delay. However, just like a farmer who can’t control the weather at harvest, it is difficult for supply chain managers to adapt to a combination of global crises and tariffs.
Covid-19 and global manufacturing
When we finally exit the pandemic, researchers will have some staggering statistics to look back on. One of those statistics will display the stunning shrink in global manufacturing that occurred during the pandemic. For those in electronics, a significant reduction in China’s manufacturing output caused shortages that are impossible to plan for. Even now, experts predict further slowing in Chinese manufacturing through Q4 of this year.
The trade war between the US and China is still ongoing. US tariffs on Chinese goods have meant increased costs for consumers and manufacturers alike, and this has had an effect on supply chains in the lighting and solar industries.
A recent government report into LED lighting found that package manufacturers passed on all or some of the tariff costs directly to consumers and that tariffs changed the way manufacturers did business: many businesses chose to relocate manufacturing from China to Vietnam or Malaysia, and those who produce intermediary components moved production from the U.S. to Mexico in response to tariff costs. Moving manufacturing creates inefficiencies and can lead to unpredictable changes in supply that translate into bottlenecks and shortages for those in the solar and lighting industries.
Changing consumer behaviour
Supply chain management is all about efficiency. If you have a sudden, short-term change in behaviour by consumers or producers, your efficiency will be hampered. Without pre-existing consumer behaviour models to work from, B2B and B2C businesses can’t make accurate predictions as they don’t have the data they need. For supply chain managers, this results in an array of issues with slack and bottlenecks forming throughout the supply chain.
Considering the options
As ever, solutions to complex issues are dependent upon context. What might work for a multinational lighting and solar provider won’t work so well for a Mom-and-Pop store selling lighting hardware in Idaho. With this in mind, developing a strategy and a set of tactics you can take to improve the efficiency of your supply chain and avoid bottlenecks can help. Your strategy will inform the steps you take, or the tactics, to keep your supply chain flowing, especially during the holidays.
Now is a good time to reassess your costs and ensure you aren’t spending more than you need to during the supply chain process. There are a few strategies you can utilise to reduce costs in shipping and e-commerce, and the simplest is to compare rates and re-negotiate. You likely chose your supplier in a pre-pandemic economy, but Covid-19 has shaken up business at all levels. As such, it’s worth looking around to see if cheaper options now exist that will still get the job done.
Assess your supplier
Are your suppliers capable of responding to the demands of the pandemic? What direction do they seem to be heading in now that a greater proportion of the global population is vaccinated? Do they utilise emerging technologies where possible to reduce costs and create more efficient production? If your manufacturer is unable to remain competitive in the face of the pandemic and technological advancement, it may be time to make a switch.
Hold the line
The renewable energy industry has grown during the Covid-19 pandemic and government initiatives around the world are making it easier for folks in renewable energy to do business. Last year, more than 80% of all new electricity capacity came from renewable sources. The broad point is clear: renewable energy is big business and is worth staying in. While supply chain issues may linger for the next year, finding creative and agile solutions in response to a chaotic global economy is worth it, both for conscientious consumers who want to help the planet and manufacturers who are helping our futures become greener.