Stay Ahead: 3 Ways to Strengthen Your Supply Chain
How resilient is your supply chain?
BUSINESSTIPSSUPPLY CHAINRESILIENCE
The coronavirus pandemic has brought to light the vulnerabilities in our global supply chains. With factories shutting down and lockdowns in place in major supplier locations, manufacturers are scambling to find alternative sources of raw materials to keep production going.
Why develop a resilient supply chain?
Even if the pandemic is new, supply chain disruptions aren’t. From geopolitical tensions between the West and Russia to China leading calls for companies to reduce vulnerability, companies must look at ways to create supply chains that are both cost effective and resilient if they want to thrive. A resilient supply chain, can continue to operate and meet the needs of its customers even in the face of unexpected events and disruptions.
How can you make your supply chain more resilient?
What makes a resilient supply chain?
Able to adapt and adjust to changes in trade flows, new regulations, global changes, trade tensions, and other geopolitical movements
Can leverage technology to reduce operating costs, increase visibility, and diversify their
Supply chain network and logistics fleet that is extensive and responsive to customer demands.
Relationships based strong collaboration and supplier partnerships.
Develop Regional or Local Sources
Many companies are moving to protect their supply chains through nearshoring or developing regional and local sources.
NIKE, a sporting brand valued in excess of $32 billion outsources almost all it’s manufacturing to third party companies. Global supply chain disruptions have minimal effect on NIKE’s manufacturing because their plants source materials locally.
So even when there are lockdowns and tightening of travel rules, their supply chains are safe and can still operate. How can you apply this to your company?
Identify potential suppliers that have:
The capabilities to produce but are currently supplying to a different industry.
Have similar capabilities that can make investments to produce the desired product
A long-term supply agreement can be signed to incentivize suppliers with an appetite to grow and expand their business
Having your manufacturing and raw material supply closer together can not only help reduce transportation and logistics costs but protect your company from global disruptions.
Partner with Distributors
Companies can also mitigate the risk of supply chain disruptions by partnering with distributors. Thanks to the growth of e-commerce during the pandemic, warehouse and distributor capacity has increased in many countries.
This presents an opportunity to source for a distributor within the region that can:
Allowing you the opportunity to deliver products with shorter lead times and make it less susceptible to potential disruptions from global manufacturers.
Better understand and serve the needs of its local customers, you can increase safety stock of products that are in demand according to the region and redistribute products across the globe and more efficient distribution and logistics.
Source Alternative Materials Available Within the Region
Coca-Cola who has 225 bottling factories worldwide and they source the two most important ingredients for their drinks locally.
Sugar and water.
Each of their production plants are allowed to choose the type of sugar used. Plants in Europe, mainly use beet sugar but in Asia and America they use cane sugar and corn syrup respectively.
Looking for readily available materials can help you save costs over incumbent materials that may be pricier and have higher lead time. Find alternative materials by:
Conduct a structured strategic sourcing event with clear boundaries and specifications to source for potential alternative materials that perform similarly to the incumbent product or service.
Initiate a product commercialization process to evaluate and qualify the product prior to being used.
While the process may take time, this will open supply chains to now having a more diversified supply and product portfolio capable of enduring supply chain disruptions.
Read about how implemented these steps and improved the lead time from 16 to 5 weeks for a product commercialization for our client here.
Conclusion
Supply chain disruptions make it difficult for companies to source materials and receive them at an undesirable lead time. However, by being strategic about developing and managing supply chains, it's possible to mitigate the risk of these disruptions.
In an interview with The Financial Post, Brian Higgins head of KPMG’s U.S. supply chain and operations practice said,
“A lot of the operating models in the supply chains we see as broken today, were cemented 20 years ago on what at the time were universal truths… It lends itself to these very long supply chains because they are (focusing on) cost, not risk. We’ve seen that fracture many, many times.“
Don’t wait for the fracture, enhance the durability of your supply chain by implementing protective measures today.
Reach out to us and let’s see what we can do for you.
References
"Economic Impacts of COVID-19 on Civil Aviation," International Civil Aviation Organization,
https://www.icao.int/sustainability/Pages/Economic-Impacts-of-COVID-19.aspx"Supply chains: Companies shift from just-in-time to just-in-case," Financial Post,
https://financialpost.com/news/economy/supply-chains-companies-shift-from-just-in-time-to-just-in-case"Trade and Development Report 2020: Policy Challenges for the Global Economy," United Nations Conference on Trade and Development,
https://unctad.org/system/files/official-document/ditctab2020d4_en.pdf"Leveraging New Tech to Boost Supply Chain Resilience," Harvard Business Review,
https://hbr.org/2022/10/leveraging-new-tech-to-boost-supply-chain-resilience"How Tesla Weathered Global Supply Chain Issues That Knocked Rivals," Reuters,
https://www.reuters.com/markets/europe/how-tesla-weathered-global-supply-chain-issues-that-knocked-rivals-2022-01-04/"The Amazing Supply Chain of Coca-Cola," All Things Supply Chain,
https://www.allthingssupplychain.com/amazing-supply-chain-of-coca-cola/
"Cities Make Room for a Surge in Online-Only Retail," Bloomberg,
"Assessing the environmental and social impacts of global value chains," Science Direct,
https://www.sciencedirect.com/science/article/pii/S2351978920303590
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