6 Steps to a More Resilient Supply Chain
Article from MHI Solutions Magazine
The COVID-19 pandemic devastated the supply chains of many sectors, and many companies are still feeling the aftershocks. As they try to get back to normal operations, businesses are pondering what they need to do to build supply chains that are, if not quite invincible, at least more resilient. These six strategies could increase their chance of success.
- Building end-to-end visibility
Visibility is at the heart of a resilient supply chain, but businesses today frequently lack real knowledge of what’s happening with their suppliers and their customers at multiple levels.
“In the effort to continue to reduce costs to build products and to be competitive in the marketplace, companies have looked globally to supply chains,” said Aaron Parrott, managing director with Deloitte Consulting LLP. “But some really don’t understand what their supply chains look like. They know tier one, but beyond that have no idea how their supply chains are structured.”
Companies should be tracking their tier one suppliers’ suppliers, those tier one suppliers’ suppliers and so on, identifying and paying the closest attention to those that are key to their businesses. An automotive manufacturer, for example, should have a system in place so it quickly gets alerts if a fourth-tier producer of ball bearings used in a gear box can’t get the materials it needs, or if a fifth-tier supplier has gone bankrupt. Without timely interventions, both of those scenarios could shut down production lines.
“Visibility doesn’t fix the problem, but visibility does let you know that you have a problem,” said Jim Tompkins, chairman of MHI member Tompkins International.
But that’s just one side of the supply chain. In order to anticipate demand and to be prepared to adjust production levels, companies must know not only what their own customers will want to buy but also what their customers’ customers are looking for.
Companies like IBM and Dell, which have invested heavily in supply chain visibility, have reaped the benefits during the pandemic. “They were able to pretty effectively meet their customers’ demands throughout, even though there were disruptions at various points, because they could see well in advance when things were going to disrupt production or customer delivery,” said Steve Tracey, executive director of the Center for Supply Chain Research at Penn State University’s Smeal College of Business. Armed with that knowledge, they could start finding workarounds at a time when other companies were still scrambling to figure out where their supply chain breakdowns had occurred.
2. Rethinking sources of supply
The last few decades, due to China’s low production costs, many businesses have relied on that country’s manufacturers to produce all or a very significant percentage of their parts and products. At the same time, companies have reduced the number of suppliers to take advantage of volume discounts on orders.
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