Global supply chain leaders have broad and continuous experience in expecting the unexpected. They regularly plan for and respond to regulatory changes, natural disasters, labor strikes, fluctuating tariffs and other disruptive events. Common disruptions, like late shipments or unexpected short orders result in mild irritation compared to the more disruptive events like COVID-19.
How do Disruptive Events Impact the Supply Chain?
The supply chain impact resulting from coronavirus varies heavily depending on the industry. Producers of toilet paper, cleaning wipes and personal protective equipment are seeing spikes in demand that require the running of additional shifts. Farmers have to dump milk and break eggs as sales to restaurants, hotels and cafeterias are erased. Oil producers are running out of storage options. These are just a few examples of how a crisis may increase or decrease demand for particular products resulting in supply chains being impacted.
The current pandemic-related spikes and shortages are a stark reminder that when a market disruption occurs, preparation and the ability to rapidly respond matters more than ever. Increasingly, we see manufacturers placing less emphasis on cost savings and more importance on supply chain adaptability, risk management and speed. The desire is to create flexible sourcing and connected supply chain networks that effectively respond to customers’ issues and expectations.
Supply chain professionals continuously focus on performance improvements, and this recent crisis provides another opportunity to reevaluate and strengthen supply chain operations. For many, greater visibility, accelerated decision-making and rapid responsiveness will take on greater importance in preparation for future disruptions. The following are four key areas that can help manufacturers mitigate supply chain risks and build adaptability for future shocks.
1. Increase Demand Planning Accuracy
There are plenty of disruptive events and situations that affect product demand planning including seasonal trends, customer buying patterns, unexpected weather events and competitive product innovation. Historically, manufacturing firms have created forecasting processes with information that includes outdated demand patterns. In this current environment, it’s essential that firms access real-time customer and consumer behavior to illuminate changing patterns and adjust supply chain responses to better meet customer expectations. Disruptions like the COVID-19 pandemic make accurately forecasting final customer demand even harder. With the technology available today and quicker access to information, more precise demand tracking and monitoring allows for appropriate and timely adjustments to better meet customer demands and reduce inventory levels.
2. Boost Global Supply Chain Visibility
Adopting a comprehensive view of the global supply chain, from raw material suppliers, transportation partners, retailers and others, manufacturers can maximize supply chain performance. According to Forbes, “Holistic visibility into supply chain processes makes it easier to see problems and collaborate on solutions.” Quicker access to possible supply chain disruptions can determine critical component availability for operations and product availability for when and where customers demand. Additionally, customer relationships can be further strengthened by digitally collecting and sharing supply chain information, like inventory availability and shipment status. Real-time data access and transparency allow supply chain trading partners to gain decision insights, collaboration and analytics resulting in greater flexibility to respond to unexpected supply chain disruptions.
3. Reevaluate Lean Inventory
Lean manufacturing has revolutionized production and supply chain operations over the years, resulting in business benefits and the elimination of waste. Many of the concepts are predicated on minimal inventory that is pulled quickly from suppliers. And, the concepts have been utilized by numerous manufacturing sectors since the first design of the Toyota Production System.
But how lean should you go to cost-effectively address unforeseen supply chain disruptions? A lean inventory approach has great benefits, but companies will need to review this balance of too much versus too little inventory as a result of coronavirus disrupting supply chains with long delays or unfulfilled orders. Many will still look at inventory like Apple CEO, Tim Cook, does—as “fundamentally evil” and a risk—as it’s bound to be written down if it’s not moving. For other companies, now is the right time to reevaluate your inventory management strategy with a lean approach to confirm you’re best prepared for future supply chain turbulence.
4. Accurately Assess Risk
So many supply chain tasks, when responding to a disruption, are reactionary. Will the shipment arrive on time? Do we have a substitute supplier? Can we address the issue with a transfer order? Once the immediate risks have been addressed, supply chain leaders need to devote sufficient time to assess future risk and fortify an adaptive supply chain for unexpected disruptions. Any processes or key learnings accumulated during the pandemic crisis should be included within formal documentation and reliably monitored to avoid future supply chain vulnerabilities. Stronger supplier collaboration, dual supply sources, production relocation and digital supply chain capabilities are just a few areas that should not be overlooked for mitigating supply chain risks.
Supply chains consist of complex networks that need to operate both globally and locally. Disruption is a constant for supply chains whether large or small. Is your company taking the time to review fresh strategies and reevaluate past approaches? Now is the time to consider digital innovations for maximizing global supply chain performance, and the QAD Supply Chain management solution is here to help.