The COVID-19 pandemic brought to light a stark reality about current supply chains. As Nissan Motor Co.’s Chief Operating Officer Ashwani Gupta points out, “The just-in-time model is designed for supply-chain efficiencies and economies of scale. The repercussions of an unprecedented crisis like COVID highlight the fragility of our supply-chain model.” The U.S. supply chain has so far struggled to adapt and restock pandemic-depleted inventories. There are industrywide shortages and a lag in how many manufacturers are responding.
In their recent MEP National Network™/Modern Machine Shop webinar “How Smaller Manufacturers Can Develop Risk Management Strategies for Their Supply Chains,” gsteinberg [at] cmtc.com (Gary Steinberg )of California Manufacturing Technology Consulting (CMTC, the California MEP Center) and cscafario [at] dvirc.org (Chris Scafario) from the Delaware Valley Industrial Resource Center (DVIRC, part of the Pennsylvania MEP) shared strategies for identifying and mitigating supply chain risks, especially aimed at small and medium-sized manufacturers (SMMs).
Supply chains often represent a company’s highest costs. Identifying risks to your supply chain can help you respond rapidly and confidently to future supply chain disruptions. Common supply chain risk drivers involve disruptions, delays, inaccurate forecasting and procurement issues. Obviously, we all know now that a pandemic poses a major risk to supply chains, but other disruptions include natural disasters and labor disputes. Raw material delays, lack of capacity at a supplier, poor quality, transportation capacity – these all create bottlenecks. Inaccurate forecasting, short product life cycles, one-time events or sales promotions, and seasonality can wreak havoc on getting products out the door. From the procurement side, beware of key components obtained from a single source, industrywide shortages and long-term versus short-term contracts.
Your supply chain is only as strong as its weakest link. Relying on single source suppliers is a common misstep for smaller manufacturers. It’s natural to build relationships, but having too many eggs in one basket is a huge risk. Silos within your organization – your procurement disconnected from sales, operations, customer service and R&D teams – is another huge problem for your supply chain. A simple change in daily routines can resolve these disconnects. Finally, the truth is that many SMMs don’t have experience forecasting inventories. Their response to the current supply chain issue is to buy as much as possible and hope they won’t run out. This creates setbacks while undoing years of continuous improvement initiatives. Storing three years’ worth of grease leaves a small firm with a limited ability to operate efficiently.
In summary, here are some common supply chain mistakes for SMMs:
The goal of the supply chain is to deliver products to customers on time and at the lowest cost possible. It is a closed-loop process involving many interdependent disciplines – strategic planning, inventory management, vender management, operations, distribution and logistics, and customer experience. Here are a number of things that will help you build a strong and resilient supply chain.
The actions that you take now not only help with today’s supply chain disruptions but lay the foundation for dealing with future disruptions. To be proactive, you must dedicate resources to work on strategic supply chain projects, to use tools and metrics to identify supply chain risks, and to work as a team to mitigate risks. Here are some key actions to consider:
The COVID-19 pandemic has disrupted supply chains nationwide. While the pandemic was unexpected, disruptions are a fact of life. Firms that put time and effort into reducing supply chain risks now will be able to weather future disruptions more easily. Your local MEP Center should be your first call. They have solutions that are right-sized to meet the needs and capabilities of SMMs.
MEP experts have tools so you can collect the right metrics to understand your supply chain. They can open doors for you and make introductions so you can establish new relationships. The MEP National Network Supplier Scouting service connects SMMs from across the country free of charge. Through it, your local MEP Center can submit a nationwide request that goes out to all 51 MEP Centers and can be seen by the MEP National Network’s manufacturing experts, all of whom are happy to share knowledge and resources. Let the MEP National Network help your company develop a more resilient supply chain.