Amidst the COVID-19 pandemic, it’s no secret that hundreds of thousands of manufacturers across the globe are under great amounts of stress. Most have had to scramble to protect their employees, address business challenges and risks, meet demand, and ultimately, survive. With social distancing initiatives in effect, work has shifted radically with a large majority of employees working remotely. Ascertain areas of business have slowed or even shut down completely, manufacturers across multiple industries are faced with increasingly negative impacts on their supply chains.
How should your business be responding to COVID-19’s effects on supply chains? Here is a look at how you can plan to meet demand challenges and be prepared to successfully face any crisis.
1. Supply chain diversification
While some companies may lean towards having a single supplier to save costs or secure their supply, this strategy can pose many risks. If that supplier shuts down temporarily, it will severely disrupt the entire supply chain. Supplier management could make or break some manufacturers as demand spikes.
Even before the pandemic, it was important to diversify your supplier networks, and even more so now. Diversity ensures a steady flow of materials.
In the face of the pandemic, new methods of engagement need to be explored to diversify supplier networks. If you haven’t yet taken these measures, it is time to qualify new suppliers and drive future flexibility across your supply chain. A roster of local suppliers ensures that your supply chain remains undisrupted in a global crisis that affects cross border trade.
2. Manage supply
When it comes to managing your supply, it is crucial that you understand your supply chains upstream beyond your supplier, to their suppliers, and so on. Past natural disasters have shown that companies tend to miss the upstream effects on their supply chain and get caught unprepared. In 2005, Hurricane Rita in the Gulf of Mexico forced many Gulf area oil refining operations to shut down. Roughly six months later, petroleum supply issues caused many packaging shortages. Stepping through the tiers of suppliers can shed light on these issues now, so that you can properly plan for future disruptions.
3. Manage and monitor inventory
In the current climate, depleted inventory levels are placing a major strain on manufacturers. It is more important than ever to maintain close relationships with suppliers to be aware of their inventory and capacity constraints so that you can ensure a steady supply of raw materials. You can optimize your inventory by identifying critical parts and location optimization.
Innovative inventory management strategies such as DDMRP (Demand Drive Materials Requirement Planning) can ensure you have the right inventory at the right places, despite supply and demand disruptions.
4. Adjust and optimize production
Beyond managing suppliers and inventory, you should also consider the production side.
Your product mix might need to change because, in a crisis, some products may have higher or lower demand than usual. You must ensure that your people and technologies can support the changes. For example, on the people side, cross-training means people can shift from producing one product to another. Cross-training is not only useful in crisis situations, but even for vacations and turnover.
Good people can be held back by manual processes and weak technology, so it’s important to have technology that makes people more efficient and nimble. If you’re still scheduling production on spreadsheets and using paper to record inventory usage and finished goods production, it’s time to look at automated systems to free up your people to do value-added work. Throughput and agility are always important, and even more so in a crisis, otherwise, your customers will go elsewhere.
Also, don’t be afraid to collaborate with outside sources. For example, 3M is partnering with Ford to maximize their respirator output. These types of collaborations will benefit all parties involved.
5. Control Logistics
Another area to prep is in logistics and transportation. Once again, business continuity plans must be reviewed and risks analyzed. If transportation lines break down, can alternates be used? What are the effects on costs and lead times? It’s important to review your ports, your logistics capacity pre-booking, and route optimization. Are you optimizing your logistics capacity? Again, have you considered leveraging local suppliers? If not, you should investigate transportation routes and determine if adjustments can be made.
With the current state of the economy, there is much uncertainty. If you don’t already have a plan in place for adapting to the existing pandemic, it is important that you do so now. Not only will this help you mitigate the negative effects of COVID-19 but also navigate future crises should one arise. This planning should include a detailed look into suppliers, inventory, operations, and logistics. With good preparation, your company can adjust to changing conditions quickly and efficiently. Ultimately, strengthening your supply chain will help you remain viable in this difficult time. By taking the appropriate steps, you can come out of this pandemic stronger than ever before.
1 thought on “5 Ways to Crisis-Proof Your Supply Chain”
Those are some great points. The supply chain crisis was caused by a combination of things. The lack of raw materials and the outdated supply chains, in combination with consumers’ panic buying spree, strained the whole system. So we need to be ready and better prepared for future events like this.