Supply Chain Resilience: What It Means for the Future of Manufacturing
Manufacturers often struggle with supply chain management, but until recently, supply chain resilience was far from top of mind. As far back as 2017, Deloitte reported that 74% of manufacturers faced a disruptive event with third parties over the past several years, and one in five faced completed third-party failure or “an incident with major consequences.”
The concept of supply chain resilience isn’t new. In 2003, for instance, Boeing sought to shorten the time to manufacture aircraft by outsourcing assembly to subcontractors around the world. Boeing quickly found that although on paper this new system looked great, in reality, it was beset with problems. For example, the lithium-ion batteries in the new Boeing Dreamliner series of aircraft overheated. The planes were grounded until Boeing could track down and correct the source of the problem, but because this part of the aircraft was manufactured by several subcontractors, it took them longer to find the “broken link” in the supply chain or the place where the quality had fallen short. Lives depended on it.
When the global pandemic hit, factories in China were shuttered to prevent the spread of the disease. Because of this, critical computer parts were in short supply. GM is bracing for $2 billion in lost profit because they cannot get new vehicles off the lots without vital components that remain scarce due to supply chain disruptions.
Most manufacturers still weren’t prepared for the unanticipated disruptions of the past year. Country-specific supply chain challenges, and shortages of critical parts such as computer circuitry, manufacturers in the United States are rethinking supply chain management and supply chain resilience.
Supply Chain Resilience vs. Supply Chain Independence
Consider your current supply chain; where does each item come from? If it comes from a single country, you may have supply chain resilience problems.
Supply chains tend to be large, complex, and interdependent networks of businesses. Even though your firm purchases raw materials from firm X, firm X might have several other companies which supply the raw ingredients to manufacture the materials your company purchases to make the end product. There’s a reason supply chains are called chains—break any link in the chain and the entire chain breaks down.
Supply chain resilience seeks to resist disruptions or recover quickly in the event of a disruption. Many events can cause disruption: natural and man-made disasters, equipment failure, fires, labor disputes, political turmoil, and terrorist attacks are just a few situations that can severely disrupt the supply chain.
Five Areas to Manage to Minimize Supply Chain Disruption
No one can predict any of these events, but with a resilient supply chain, manufacturers can work around them to continue production with minimal disruption. There are five areas that manufacturers should pay special attention to in order to improve supply chain management and minimize potential disruption.
- Understanding and Using Data
Manufacturers who can collect, manage, read, and interpret data from all points on the supply chain and throughout their companies can remain ahead of potential supply chain disruption by anticipating problems. The ability to collect and manage large amounts of data is made easier by the use of enterprise resource management (ERP) systems with business intelligence (BI) to help interpret and use the available data.
What other sources of data can be leveraged to improve supply chain management? Internal data, captured by an ERP system, is the first step. Some ERP systems enable suppliers to log into the system or connect via APIs, software that allows their system to communicate safely and security with the manufacturer’s system, thus enabling external data to be added to their company data.
Another important source of data is social media. A CRM system, or customer relationship management system, can collect data from social media channels and messages to add to the overall repository of knowledge.
Data alone, however, is useless if it goes unused. Data must be reviewed and analyzed for trends. Once trends are spotted, they can be used to predict supply chain problems. Managers can take preemptive steps to mitigate risk, such as lining up alternative sources of critical components, raw goods, and resources.
- Compliance Management
Nearly all industries today work under a series of laws, regulations, and guidelines for manufacturing. Keeping track of the ever-changing tax codes, FDA regulations, OSHA safety requirements, and myriad other regulations can be a full-time job. Multiply that by the number of regions worldwide that your company transacts business with, and you can see how managing compliance can be challenging.
Manufacturers must be careful to follow all pertinent requirements. The trick, of course, is to understand which ones you must follow, and which are merely guidelines. If you work with particularly challenging industries or countries as part of your supply chain, consider working with a third-party consultant well-versed in that industry or region to offer guidelines and advice.
Supply chain resilience depends upon the ability to quickly adapt and make changes within the supply chain. Having someone on call to help understand compliance issues can take a huge weight off your mind in the event you must shift suppliers to a region of the world where you haven’t previously worked. Trying to sort through countless import and export laws, business requirements, and local trade practices alone can be difficult, let alone trying to do it quickly to maintain continuity in the supply chain.
- Develop contingency plans
A resilient supply chain is one that has many “what if” scenarios planned and mapped. The time to make contingency plans is when everything is going right, not when you’re faced with everything going wrong.
Research potential suppliers well in advance of emergency needs. Spread out your suppliers, if you can, across multiple areas, so that if a disaster should strike one area, a supplier in a different area remains unaffected.
Map what-if scenarios based on shortages, natural disasters, transportation and labor strikes, and many other cases. For possible scenarios, return to your data. What challenges has your company faced and overcome in the past?
Lastly, as your company does face and overcome challenges, make sure you take time to document both the challenges and the solutions. Save these in a place where other managers can take advantage of them and use them as possible springboards for further what-if planning.
- Continually assess suppliers
Another aspect of supply chain resilience is constant assessment, or reassessment, of suppliers. Never take a single supplier for granted. In addition to having several backup sources of critical components, continually evaluate the service, quality, and prices of the materials you’re sourcing.
This is another area where a database such as an ERP for manufacturers can come in handy. Cloud ERP systems are available through a shared network anywhere someone has internet access. As you source vendors nationwide or even worldwide, your managers can make notes directly into the ERP system and share their assessments with everyone else on the team. This fosters collaboration along with supply chain resilience when you continually assess suppliers.
- Focus on improvement
Focus on constant improvement within your company. This includes a training system that offers continually training on all aspects of management.
How does this impact supply chain management? A company where everyone is trained to assess suppliers is a company focused on value, quality, and service. A company that trains its management team to review and utilize data reports from the ERP so they can monitor emerging situations is a company that’s nimble, flexible, and adaptable—and has a stronger supply chain than competitors who may not take the time or effort to offer training.
Continual improvement, supported by training all levels of staff, ensures that your company can leverage all its advantages when it comes to a strong, stable supply chain.
The Right Software Supports Effective Supply Chain Management
Throughout this article, we’ve talked about several types of software that can make it easier for manufacturers to strengthen their supply chains. This includes enterprise resource planning, or ERP systems, which consolidate data from everywhere in the company and may even include data from external sources, such as suppliers, to provide managers with comprehensive and up-to-date information.
Business intelligence or BI software takes the data from an ERP system and makes it intuitive and easy to grasp. BI goes beyond reports. It makes data actionable and usable for managers—data that can be used to strengthen the supply chain.
CRM systems can be used to monitor customer communications throughout all channels. They aren’t just for sales and marketing—they can also be used as an effective listening aid to get the pulse of the market, including suppliers.
A comprehensive and thorough approach to supply chain management, combined with the right software, can make all the different to your business.
For more information about software or services for manufacturing businesses, contact Mindover Software. Mindover Software is a software reseller with a broad range of accounting, ERP, finance, customer relationship management, and other software products. For more information, please contact us or call 512-990-3994.