Supply Chain Challenge
For most of us, a supply chain is very straightforward. It’s about ensuring raw materials are sourced and travel through the various gate posts, on time and on budget. However for those that are directly involved in managing supply chains, it is a sophisticated business that requires great skills, knowledge and technology.
Supply chain management has changed dramatically over the last forty years. Globalisation has enabled businesses to expand their reach when sourcing raw materials. Lowering of trade barriers, internationalisation of global trade, transparency and currency fluctuations have all added to the race to source from far-flung regions like the Far East and India.
In their endless pursuit of lower cost, lower risk and consistency of supply, procurement executives have honed their skills and technology developers have made fortunes. The biggest concerns they have had to deal with up to now were interruptions like the ash-cloud, nine-eleven and severe weather conditions. (I minimize to make a point.)
Because of the catastrophic events of the last five months their lives will now have to change forever. No longer can they rely on toilet rolls, PPE gear and other necessities arriving according to plan. No longer can they assume that their comprehensive planning will account for all possibilities.
Geo-political frictions have come to the fore. For example, trade between the US and China is expected to shrink in 2023 by 15% of 2019 figures. Europe too is reconsidering its options and is set to increase the carbon tax for incoming goods. Germany is going through a refresh of its national supply chain and exploring local and near-sourcing. Home-working is slowing down decision-making for some and the enhanced focus on sustainability (carbon foot-print) are all adding to the mix.
I’m listing here only some of what is known to date. We’ve seen how effective governments can be and how they can make very quick decisions when they really have to. So expect more, as governments continue to get involved in macro decisions.
And let’s not forget about BREXIT and all that entails. I have written about this many times before but it seems to have lost out on air-time to C-19. This significant crisis has not gone away and yet it will have massive impact on our country and our supply chains in particular.
Tips for building more resilience in your supply-chain
1. Risk analysis
The first step has to involve a thorough risk-analysis. When C-19 became an issue in March, I was working with two different organisations at that time that were dependent on sourcing ingredients from China. Both have since explored their options and have thankfully found alternative supply routes. You too might consult all relevant people in your organisation and your supplier base, to learn about current or pending supply chain risk points. Don’t forget to also check for what might be in your own pipeline, such as acquisitions, new products, mergers, etc.
2. Risk register
If you don’t have a risk register in your business, create one now. Many risk registers that I’ve seen tend to focus mainly on financial controls, people and technology. Your risk register needs to embrace supply-chain risks too.
If you need to make changes, consider all options. Dual-sourcing might be appropriate. Could you also near-source a part of your supply base? Even if it is at higher cost, the risk/benefit analysis may justify it.
4. Increasing inventory levels
If capital allows it, what about increasing inventory levels? The extra cost might outweigh the risk factor.
5. Shorten your planning cycles
Could you shorten your planning cycles? If it’s essential to continue to source from far-flung places, could you renegotiate your terms?
6. Crisis planning
Crisis planning also has to escalate in your thinking. While it’s a hundred years since our last global event, we can’t assume that cycle will continue. Never again can we let ourselves be caught out like we were this time. Convene a cross-functional team to develop out the risk register and agree contingencies.
7. Skills gap analysis
Do a skills gap analysis. This event may have exposed some skill shortages in your teams. Those skills might be in strategic planning, project management, crisis management, leadership, data analysis, machine learning or other technologies.
Some countries are likely to benefit from this global event, such as India and North Africa. Europe in particular will be keen to near-source as much as possible.
But what about Ireland? There has to be opportunity for us too in all of this. We may not have the low cost-base of our competitors in the Far-east, India or North Africa, but we have other advantages. We have stable government and currency, we are English speaking, we have a highly educated and skilled workforce.
And we have relatively close links to those powerhouse countries that are reviewing their supply base right now. Let’s get thinking!