T he recent supply chain disruptions, along with upending many companies’ operations and causing delays, also exposed “how narrowly rigid many supply chains are,” says Simon Croom, Ph.D., and professor of supply chain management at the University of San Diego. A singular focus on price has too often undermined resilience. “If you can’t get supplies, it doesn’t matter if you negotiated a lower cost,” he adds. That’s one lesson many supply chain and procurement professionals can draw from the past two years. Here are a few more.
Similarly, few people like to qualify the information they’re presenting. Yet, letting others know that the information you have could change—even that it’s likely to change—allows them to begin planning for that uncertainty.
Partner with other functions to cut risks. Priorities between internal functional groups like procurement and nance often are misaligned, says Jomarie Skurtovich, vice president, operations, Avnet United and Avnet Velocity. Finance teams often view strategies to strengthen resilience, like building inventory buffers or multi-sourcing critical parts, as too costly. Conversely, supply chain leaders see the risk in many efciency measures, like sole-sourcing parts. When the two work together, “enterprises are better positioned to plan and implement strategies that lower exposure to disruptive risks without introducing cost inefciencies,” Skurtovich says. For example, proactively tapping into the expertise of nance when considering consignment or vendor- managed inventory programs can help optimize working capital.
Monitor disruptions for their impact on market share. Supply chain disruptions historically have been considered nuisances, says Tom Derry, CEO with the Institute for Supply Management. It has now become clear they’re more dangerous, cutting into sales, and in some cases, market share. For instance, revenue at a consumer products food company jumped about 10% over the past year. While half the increase stemmed from the growing number of consumers eating at home, the rest was due to competitors’ inability to get their products to the stores. “The company won market share because their competitors were having supply chain issues,” Derry says.
Consider new ideas to mitigate supply chain disruptions. Dealing with supply chain disruptions often means being open to new ways of operating, says Nicole Glenn, founder and CEO of Candor Expedite. For example, Candor is working with a fast-food retailer to test wraps that can be used on products that require temperature control, but only for a short distance. It’s one way to work around the lack of capacity in the refrigerated market. “Logistics is often the tail of the dog whipped around by market conditions and cost-cutting initiatives,” says Spencer Shute, senior consultant with Proxima. While risk can’t be completely avoided, integrating logistics into an overall supply chain risk model enables companies to react and mitigate challenges faster and with less disruption.
Source relationships, not just materials. “Supplier relationships have to move beyond transactional relationships,” says Shruti Gupta, senior manager and industrials senior analyst with RSMUS. She recalls a mid-sized manufacturer that continued purchasing parts during the COVID shutdowns in spring 2020. It was a risk to build inventory when demand had plummeted. But when demand later spiked, suppliers gave this customer priority.
Plan ahead. “The farther out you plan, the more you can get a jump on the competition,” says Mark McCullough, CEO, Gebrüder Weiss USA. In transportation, that often translates to better rates and transit times. Minh Duong, chief engineer and co-founder of Anavasi Diagnostics, worked closely with the supply chain team at their contract manufacturer to understand lead times for electronics components. He also
Communicate, even when the news isn’t good. The pandemic highlighted the importance of internal and external communication that’s real time and factual—even when the news isn’t great, like a delayed product or rate increase. “Bad news doesn’t get better with time,” says Tonya Jackson, senior vice president and chief product delivery ofcer with Lexmark International.
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