Over the past few weeks, as you’ve been running errands or completing your grocery shopping, you may have noticed some empty shelves in the baby formula aisle.
The short supply has stemmed from a number of factors, including rising costs, supply chain issues and recent product recalls by Abbott Laboratories, a primary manufacturer of formula, that led to the temporary closure of a manufacturing plant in February. These circumstances have left the company with low inventory levels and the challenge of how to fix the issues, since certain critical supplies are either out of stock or backordered.
Last month, in an op/ed piece in the Washington Post, Abbott CEO Robert Ford offered an apology to families across the country.
The unfortunate situation brings to light how fragile the current manufacturing environment is due to ongoing supply chain issues and rising costs of input. Many of these issues are in part attributable to the coronavirus pandemic and the related shutdowns and disruptions over the prior two years, but as we’ve witnessed, all it takes is one event – like the temporary closure of a plant – to be the catalyst that can cause a significant shortage or crisis.
Is your business ready to react to such a situation?
The Baby Formula Shortage is an excellent example of the need for companies to consistently evaluate supply risk to their organization. Regardless of industry, as supply chain challenges continue from the pandemic, each company should run scenario analysis to better prepare for potential impacts. Areas to investigate include in inventory stock levels (max/mins), re-order points (based on ever changing lead times) and qualify new suppliers in case a main supplier is unable to deliver.
By scenario planning, potential remedies can be put in place when a crisis arises to minimize impact to customers.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.