Coronavirus: An Opportunity To Rethink Your Supply Chain
For manufacturers that rely on overseas partners, the coronavirus (COVID-19) has put a severe kink in the supply chain.
In addition to protecting their employees, customers, and themselves from the coronavirus, manufacturers are also struggling with how to keep vital supplies flowing into their factories. For those that rely on single-source providers overseas, its putting a severe kink in the supply chain as they struggle to find domestic solutions with the capacity to keep production moving. And, while many are concerned about their tier 1 supply chain, the disruption must be addressed to the second and third tiers.
When a global crisis like COVID-19 disrupts how we manufacture, solutions that empower companies, like yours, are needed to bring products to market quickly and on budget.
Here are three main objectives to prioritize as you adapt to, and overcome, this new challenge.
#1 Create faster turnaround times
Choose suppliers with multiple locations to fulfill orders quickly. In addition to creating faster turn around times, it mitigates risk by lowering the likelihood that both facilities will be forced to close due to the coronavirus.
Maintain open communication along the entire supply chain. Be clear from the beginning about fluctuations in demand and let them know immediately if you are expecting an influx. Having a local or US-based manufacturer helps with rapid communication, transparency, and decreases the amount of time supplies are in-route.
Choosing domestic vendors shortens your lead time.
Yes, the global marketplace may offer lower prices but at what cost? Is it worth the wait for products stuck in customs or halted due to quarantines?
Companies are looking to the U.S. for materials right now as they have been feeling the impact of stalled Chinese factories that are only now beginning to ramp up again. According to an article in The Washington Post, it is about the need for raw materials to restore production, truckers, and functioning ports. It’s not just about the number of employees who are allowed to return to work. “For many U.S. companies, the coronavirus has exacerbated troubles they were already having manufacturing in China, after the Trump administration last year levied large import tariffs on Chinese-made goods.”
#2 Mitigate risk: prepare your supply chain
If you are dependent on an overseas supplier for all of your components, you already know you’re at risk. Even if your supply chain is primarily domestic, the growth of the coronavirus pandemic in the U.S. has put your supply chain in jeopardy. Harvard Business Review published an article on preparing your supply chain to mitigate risk. We’ve highlighted a few of the main points below:
- Maintain healthy skepticism. “Impact reports tend to be somewhat rose-tinted. However, local people can be a valuable and more reliable source of information, so try to maintain local contacts.”
- Run outage scenarios to assess the possibility of unforeseen impacts.
- Create a comprehensive, emergency operations center.
- Know all your suppliers.
- Understand critical vulnerabilities, take action to spread the risk.
- Have a second source outside the primary source region.
- Source locally
#3 Improve accessibility and availability
Whether you are adjusting to the current COVID-19 pandemic or making more long-term plans, remember that today is a new day with many opportunities for innovation. Every challenge requires a creative approach. Here are a few tips to keep you moving forward:
- Have multiple sources for your larger volume components. Don’t rely on only one supplier, especially if that supplier is global.
- Ask your suppliers where their components come from and be aware of any risks in their supply chain.
- Bring in a surplus of supplies, about 30-60 days of inventory.
- Keep communication open with your suppliers and work on the relationships. You want to be one of the first ones they call if their supply chain is at risk.
- Be creative and open to new ideas.
- Invest in local and U.S.-based alternatives.
The global impact of the coronavirus
What’s happening to manufacturing as the coronavirus spreads around the world highlights the uncertainty inherent in our supply chains. Working now to mitigate the impact during the slowdown as well as to prepare yourself to quickly ramp up production when the threat of COVID-19 has subsided will help make your organization more robust.
We’re all in this together and the health of our families, friends, colleagues, and customers is of paramount importance. If Xcentric can provide support to you during this challenge, please contact us.