Three Strategies That Can Help With Global Supply Chain Disruptions
Updated: Jan 26, 2022
“Do you guys sell chains here?” This is probably the most memorable quote from my early days with ASCI. 20+ years ago, supply chain was almost unheard of and very little understood by the general public. This sometimes made it challenging to promote our company, back then Alaska Supply Chain Integrators, and to explain what we do. Fast forward 20 years later, these two words are repeated on the radio, social media, and even by the White House pretty much on the daily basis.
Even though more people are now familiar with what supply chain means, there is still a lot of confusion about how to run effective supply chain operations as well as the importance of investing in supply chain products and services. When the ASCI team was hosting a booth at the 2021 MINExpo in Las Vegas in September, it took us several minutes to explain our products and services to some of the attendees. Our CEO and Co-Owner Christine came up with a pretty good phrase that we would usually start with: “we help to manage your stuff.” During the same event, a Supply Chain Superintendent from one of the gold mining companies stopped by our booth and told us how glad he was to see a company specializing in what he does. We ended up having a lengthy discussion about how most companies underestimate the importance of investing in supply chain, including information technology solutions.
Where am I getting to with this? Hurricane Katrina, LA and Long Beach Port strike, and now COVID have been exposing the vulnerabilities of global supply chain. There are numerous articles, podcasts, social media posts explaining what is causing disruptions in transportation, reduced availability and increased price of certain materials and supplies, shipment delays and labor shortages. The question is could the disruptions in 2020 and 2021 have been prevented or, at least, the impact lessened with companies investing more in supply chain planning? COVID is not the last unexpected crisis event that we will go through, and some actions that the governments and businesses are going through right now, such as ports moving to 24/7 operations, will probably be negated by the next earthquake, hurricane, labor strike, or a new strain of COVID.
During the past 20 months, supply chain professionals and businesses have worked extra hard to get shipments moving, material placed on order with alternate sources, getting creative with manufacturing, warehousing, and procurement practices, expanding remote work capabilities to find necessary resources, etc. Some say there is no end in sight, while some are remaining optimistic. There are several strategies that businesses could have invested time and money into several years ago, which would have reduced the impact of pandemic on supply chain. These strategies are discussed in this White House Briefing-Room blog and are grouped into three: visibility, buffer, and agility. All three can also be utilized right now for quicker recovery of supply chains.
Traceability, tracking, data, communication, coordination are just some of the words that explain the concept of supply chain visibility. ASCI blog “Why You Should Stop Using Excel to Keep Track of Shipments, Purchases, or Inventory” provided some insight on why using MS Excel instead of a web-based and cloud hosted system is not a good idea for mid-size to larger businesses. We also covered the topic of using MS Excel or other databases to keep track of inventory balances and transactions if you are a small business. Either way, access to organized, complete and up-to-date information is one of the best ways to observe your company’s supply chain progress, catch bottle-necks before they turn into major disruptions, and develop strategies to keep your operations going at a profit.
Data visibility does not have to remain within the businesses, especially for larger manufacturers and suppliers. Collaboration via data exchange between businesses that are dependent on each other, let’s say automobile makers and microprocessor manufacturers, is now more important than ever due to the globalization of supply chains. This could be achieved by investing into information technology solutions that can connect multiple users from different companies. Or, a good and less expensive first step, is to have frequent meetings with your company’s major suppliers to discuss their challenges and collaborate on solutions that would help both businesses.
Just-in-time inventory is a very popular concept that is used by many companies, who want to avoid spending their capital on warehouse space and on the resources required to keep comprehensive inventory. Just-in-time is a great strategy for lean operations, reduced costs of goods, and leading to bigger shareholder dividends. However, the strategy does not leave much room for any, even minor, disruption in the overall supply chain. BusinessWire article summarizes this pretty well: “When one part of the chain breaks, everyone downwind gets the blowback, such as quality control, or analysis, or shipping. The pandemic has shed the light on the importance of inventory management costs at all stages, not just bottom-line savings that finance teams seem to only measure.”
The solution in this case is to optimize, not just minimize your inventory, using data analytics and optimal pricing and lead time strategies. Increasing the options for the sources of supplies and having a strong business relationship with manufacturers and distributors is another way to add more resilience to your supply chain operations and reduce the vulnerabilities in times of natural disaster crisis or a pandemic.
The simple definition of Agility is to be easily adoptable and responsive to changes and challenges. By having a good relationship with multiple sources of materials, supplies, and services is one of the ways to respond quickly by finding an alternative if there is an unexpected shortage with the primary source. Information technology solutions with up-to-date information is another factor that would help companies with a faster response to challenges such as COVID pandemic. Sourcing products closer to your main distribution centers, storing products at multiple locations, and setting up new distribution centers using demand forecasting would help companies to anticipate fluctuations.
Another example of being agile is to partner up with a 3PL or a 4PL company that has the experience, resources, and technology to provide some or all of the solutions discussed above. This in turn would give your business more time on other projects and strategic initiatives, such as developing new products, expanding customer base, etc.
The last example of how to be more resilient and responsive to disruptive events and emergencies is to establish a framework for responding. The topic of Emergency Preparedness deserves its own blog and can be discussed for days, not just hours. There is a great article in the Supply Chain Management Review online magazine called “Building in Resiliency.” In summary, in order quickly respond to these types of events, your company should have immediate access to funding, communication plan for employees, cyberattack prevention strategies, and a supply chain plan that incorporates visibility, buffer, and agility strategies. For example, as part of our Integrated Management System (IMS), ASCI has a Business Continuity Plan that is reviewed, updated, and distributed on the annual basis. The plan covers possible threats, contingencies, organizational roles, responsibilities, plan activation and deactivation procedures for all of our operations.
Do I think that supply chain disruptions are going to get resolved any time soon? I think this holiday season is going to be a challenging one. My mother purchased my Christmas gift on Amazon during the first week of October, and immediately texted me about how long the shipment will take and that she is glad that she ordered so early. I do have more faith in business, small and large, investing more resources into improving their supply chains and preparing for a crisis such as COVID. If you live in Alaska, how prepared are you for transportation disruptions in case of an earthquake? An emergency procedure and quarterly drills training your employees to drop, cover and hold on is simply not enough…
ABOUT THE AUTHOR
Rosita Johnson is ASCI's Business Development Manager. Rosita has been with the company for over 20 years in different areas of supply chain management: procurement, contracting, inventory management, and ERP system implementation. Contact her at email@example.com to set up a free consultation appointment or to share any ideas or experience that could help other businesses.