Where once it was strictly focused on the optimization of inventory, routings, carriers, and warehousing, disruptions have forced us to pay more attention of its various nodes and sourcing. Disruptions to supply chain management is now making headlines as our nation’s need for medical equipment and our food supply chain is experiencing these serious disruptions. Suppliers and distributors face increasing demand while trying to provide a safe workplace. Travel restrictions and social distancing means less people working at the same time, causing the entire process to slow down.
If one piece of the supply chain is broken, it becomes a domino effect for the rest of the pieces down the line. The picture below shows how many steps are in the bedsheet supply chain and all the possible points of disruption.
Why do some companies do so much better than others in times of disruption? The answer lies in the ability to detect the disruption, have a plan of attack, and swiftly act upon it. While these events cannot be predicted accurately, their major impacts can be narrowed down to one of five areas, including:
There will always be disruptions and we should never assume that disruptions are an anomaly. While operations and supply chain managers focus on efficiency and responsiveness in traditional “business-as-usual” environments, they should be flexible enough to quickly switch their operation scenarios to adjust for disruptions. A scenario-based strategy for disaster proofing with a focus on consequences will not only minimize damage to the bottom line, but also help score wins over debilitated competitors. Those companies that successfully manage disruptions will come out of the disruption quicker, and with a competitive advantage. Here are some steps you can take now to mitigate your risk for further disruption.
Technology. It’s important to invest in information systems that improve real-time visibility of used and spare capacities and inventory in the entire system—including those of suppliers. Institutionalize supply chain intelligence systems, including exception-event-planning systems designed to discover incidents that cross the threshold of normal operating parameters. Employ the power of social media for early detection of disruptions.
Flexibility. Standardize components as much as possible to derive aggregation benefits and reduce overall inventory and engineering costs. In a volatile market, attempt to postpone the customization of a product until after receiving the customer order. Identify the next-best alternatives as backups for the most vulnerable supply chain nodes.
Sourcing. Supply chain decisions should not be made on the basis of traditional costing models, but rather, on the total cost of sourcing equations that are adjusted for the expected value of supply chain risk.
Testing. Conduct regular mock drills for likely disruption scenarios to evaluate preparedness.
Critical components and supply chain nodes. Segment inventory in levels of criticality based on unit cost, sourcing, manufacturing options, and lead time to restock. Maintain progressively higher buffer levels for critical segments.
Supplier selection and monitoring. Screen critical suppliers based on their risk scores and mandate the selected ones to institutionalize a realistic business continuity plan. Test the relevance and dependability of suppliers’ plans. Conduct regular meetings or teleconferences with key suppliers to get their opinions and feedback on potential disruptions.
Supply chain intelligence. It is vital to keep an eye on each country or region for threats and trends that will affect the supply chain: weather, port and transportation worker strikes, fuel prices, currency exchange, inflation, labor rates, pending legislation, political elections, natural disasters, and more. Constantly monitor the supply chain for exception events and assess their
potential impacts.
Every possible disruption scenario cannot be anticipated. However, a generalized disruption plan can facility responsiveness, even to a COVID-19-altered world. Companies that were ready for the disruption most likely survive this pandemic. For companies who are just now being forced to look at their own supply chain, the news is not all bad. There are steps that can be taken now to ensure that at any time, for any reason, your supply chain is protected and will continue to function. All you can do is learn from your mistakes and prepare for the next disruption which will undoubtedly be coming.
