The pandemic crisis revealed the fragility of the modern manufacturing supply chain. First there was supply shock, followed by demand shock. Finding basic materials and products was sometimes impossible, revealing an urgent need to design smarter, stronger, and more diverse supply chains. Many businesses have experienced first-hand the hidden costs of single-source dependencies and poor flexibility in adapting to real-time shock. Change has already begun, but supply chain management and infrastructure is still in need of a broad overhaul.
Supply Chain Crisis Management
The COVID-19 crisis exposed vulnerabilities in many organizations, especially those that rely heavily on China or other international suppliers to fulfill needs for raw materials, or even finished product. The rapidly changing situation demands a creative and flexible response to supply chain crisis management.
Know Your Suppliers
The first step in your manufacturing supply chain crisis management response is to review your entire list of suppliers. You may need to contact several of them, including those you haven’t dealt with in a long time, to find what you need to complete orders.
- Connect with suppliers you haven’t purchased from in the last few years to make sure they are still in business. Review credit terms and shipping times as well as availability of materials you might need.
- Conduct quick inventory updates now, especially among items in great demand.
- Order frequently needed items. Although we normally caution against stockpiling inventory, now might be the time to bend that rule a bit, especially with components and materials sourced from overseas.
- Find alternative local, American, or North American suppliers with similar goods needed.
Run What-If Scenarios
Run outage scenarios and what-if scenarios now and review them with your team. Discuss approaches to each situation and how you might overcome the potential challenges posed by the what-if scenarios. For example:
- What if we cannot get supplies to complete an order?
- What are the alternatives if our main supplier shuts down?
- What if 20, 30 or 50 percent of our staff calls in sick?
- What if we find we cannot complete orders due to a forced shutdown? How will we communicate with both our teams and our customers?
- What if we are forced to telecommute again due to a resurgence, which will negatively impact our factory staff? What then?
- What if we cannot obtain packaging materials? What alternatives do we have locally?
- How will these alternatives affect price, delivery, or quality?
Brainstorm with your team for potential solutions to every aspect of supply chain disruption, including shipping, warehousing, and sales disruptions.
Plan for the Unplannable
Unexpected natural disasters force businesses to cope with completely unexpected situations. Many companies found after Hurricane Katrina that plastics and petroleum-based products were in short supply because the oil refineries along the coasts were closed and/or damaged. Alternatives had to be sourced, and quickly, to fill customer orders.
We are facing a unique situation with COVID-19. We can compare it to regional disruptions from hurricanes or previous global flu epidemics, but each one posed unique challenges to manufacturers. The challenges your business will face differ from any seen before, so expect the unexpected.
Accurate Information Is Vital
One important aspect of supply chain crisis management that cannot be understated is the importance of accurate communications. Look for vetted information from credible sources, such as the World Health Organization (WHO) and the United States Center for Disease Control (CDC).
Communicate with Customers
Just as communication with your employees and suppliers is vital, so too is customer communication as part of supply chain crisis management. Continually update your website with a message or alert about possible delays as availability shifts, and keep in close contact with customers about order status. Avoid making promises about delivery times. It is better to under promise and over deliver than to disappoint customers.
Key Takeaways for Manufacturing Supply Chain Crisis Management
- Know your suppliers and alternatives to current suppliers should disruptions occur
- Have or update contingency and emergency plans
- Establish crisis communication channels for employees, suppliers, and customers
- Evaluate “what-if” scenarios and discuss alternatives before they become an emergency
- Switch from overseas suppliers or sole-suppliers for materials to multiple suppliers to mitigate supply chain disruptions and the risk of complete shutdown due to dependency on a single source
- Source locally, if possible, since foreign sources of materials may be the most impacted
- Care for your people. Know your employees and ensure they have the resources they need to care for themselves and others in the emergency.
The events of 2020 have revealed weaknesses in global manufacturing systems. Responding requires fundamentally rethinking supply chains. Understanding your supply chain risks will give you more power to plan ahead while maintaining customer experience in the face of crisis.