Supply chain agility is essential if the manufacturing industry is to keep up with customer expectations of personalization and convenience. But in many ways, agility remains a buzzword only, as manufacturers lack the ability to quickly integrate local providers, adapt inventory, and rejig processes. To change this, manufacturers must adopt a glocal mindset – strengthening their local competencies alongside integration with the global hub. The blog discusses why this approach is especially important during a pandemic.
As industries come out of COVID-19, there needs to be serious retrospection of the impacts and responsiveness of our supply chains.
“An ever-expanding set of global challenges has increased the surface area and magnitude of supply-chain risks,” mentions McKinsey. “Fast forward to the coronavirus crisis, whose humanitarian and human-livelihood costs are still rising, even as it also reveals supply-chain vulnerabilities that many companies didn’t realize they had. As a result, building flexibility and resilience in operations has gone from one priority among many to business-critical.”
Grasping Immediate Challenges
What measures do organizations adopt to bring crippled supply chains back to responsiveness and resilience? Which areas demand their attention?
As organizations formulate and act on crisis management tactics across the board, a few areas emerge as extremely critical. These are: employee safety, operational viability, and supply chain dependencies especially on the China market, which was heavily disrupted at the start of the pandemic and spread across the globe. These three areas marked the early-stage response to disruptions in the manufacturing industry supply chain.
Getting Ahead of the Disruption Curve
Post the short-term crisis phase, it is now important for organizations to address the supply chain’s “nerve center.” Focusing on the root cause scientifically will help to overcome similar crisis situations in the future. And to get to this organizations must take a holistic approach towards supply chain management, looking at the below action points:
Enable supply chain transparency, where all stakeholders, suppliers, and vendors have visibility into key components
- Create a supply chain network dedicated to Just-In-Time (JIT) components from both global and local suppliers
- Access predictive insights into changing customer demand, aligning these against the manufacturing organization’s logistics and supply chain network
- Prioritize and categorize the supplier network and conduct cash flow stress test to drive efficiency.
Building a Seamless Digital Thread for Supply Chain Resilience
Organizations can achieve supply chain resilience and responsiveness by creating a digital thread, which covers all the stakeholders involved – this includes customers, supply chain partners, and internal manufacturing capabilities. To create this digital thread, organizations would need to come up with innovative business models, changing their operations to adopt simulation-based and data-driven operating platforms. This would speed up supply chain response, while also making them more accurate.
Technology investment is a top priority for supply chain leaders – 67.6% said there is a renewed surge in interest in digital technology owing to COVID-19. That’s because a digital thread would allow supply chains to be truly global. To ensure its effectiveness, organizations need a set of key levers that are central to post-COVID-19 recovery, responsiveness, and resilience.
- Smarter operations - Establish dynamic Sales & Operations (S&OP) scenario planning and execution. Move to shorter and more responsive planning cycles. Rebalance product and services portfolios — for example, embrace rapid rationalization and substitution strategies. Rethink traditional operating rules, including JIT, minimum scale, and inventory policies, which includes the use of multi-sourcing strategies for critical materials.
- Next-gen technologies - Invest in advanced analytics capabilities to improve insight generation, supply chain visibility, and production speed. Adopt 3D printing to bring component manufacturing closer to customers and as well the manufacturing plants which consume them; diversify and de-risk end-to-end network structure. Invest in digital decision-support tools such as Artificial Intelligence (AI), Machine Learning (ML), and Internet of Things (IoT)-based track and trace.
- Increased agility - Simulate supply chain disruptions and test robustness both from production and logistics point of view. Institute flex-up capabilities across suppliers, manufacturing, and logistics. Develop flexible supply, production, and logistics partnerships with elasticity and grit to meet stress situations like a pandemic
Towards a Business Collaboration Platform that Powers Glocal Supply
These three levers (smarter operations, next-gen technologies, and increased agility) will help manufactures in a myriad of ways.
Manufacturers can check whether the demand signals received from customers (both short and medium-term) are realistic and reflect underlying uncertainties in long-term forecasts. The Kanban-based demand insights will now follow adjusted lead times, safety stock, and buffer mechanisms. This, coupled with a diverse supply network, more localized logistics, and component-based production through 3D printing, would dramatically improve delivery agility.
But to achieve these benefits, manufacturers need to create a unified business collaboration platform that would consolidate data from stakeholders, derive insights, and govern supply/production. The platform would use technologies such as blockchain, AI/ML, and data models to give organizations a near-real-time view of customer demand and capacity requirements
Based on this, it is possible to plan internal manufacturing capabilities for the redefined capacity – led by cobot and lean teams who are equipped with the details of glocal supplier capacity.
Ultimately, this will help to meet evolving demands through distributed manufacturing plants and glocal logistics, reducing the impact of future crises. This is probably why 72% of business leaders believe that better resiliency and agility due to the pandemic will make their companies better in the long run.