Using an Agile Supply Chain to Avoid a Coronavirus Disruption

Using an Agile Supply Chain to Avoid a Coronavirus Disruption

Disruptions in Multiple Supply Chains Are Happening Now

“Reports on how the Covid-19 outbreak is affecting supply chains and disrupting manufacturing operations around the world are increasing daily. But the worst is yet to come.” by Pierre Haren and David Simchi-Levi.” Harvard Business Review, February 28, 2020

Analysis has shown that for most companies, the inventory coverage they have will allow them to match their supplies with demand, with no additional supply, for between two to five weeks, depending on the company’s supply chain strategy. If the supply of components is disrupted longer, manufacturing will have to stop.” Supply lead times will also have an impact. According to Pierre and David, “there will be a spike in the temporary closures of assembly and manufacturing facilities in North America in mid-March.” Wow!  

Please click to read the full Harvard Business Review article.

The challenge is significant in all industries, especially in the high-tech industry, but it does not have to be. If Pierre and David’s predictions are accurate, there may not be much you can do to improve your supply chain in the short run.  Can you implement a variety of strategies and technologies to help sustain a reliable supply chain in the future? Yes, and here is an example:

Agile Supply Chain Application

Profit Point developed an Agile Supply Chain application several years ago for a leading technology supplier that gives instant visibility along with decision support capabilities. The tool flags product shortages along with changes in product availability lead-times that take longer than expected at the manufacturing level. This visibility allows this consumer technology supplier to make sourcing adjustments when they see shortages on any components that will affect their assembly and manufacturing process. In summary, they see red flags on shortages and can resource those items with other vendors or manufacturing sites to avoid disruptions in their supply chain.

The Agile Supply Chain application has proven valuable to this client.  For example, the tool provided them insight into their supply chain during the Japan tsunami crisis and allowed them to continue operations with minimal disruptions.  It also allowed them to communicate with their clients, such as Wal-Mart and Best Buy, with any foreseen interruptions to their orders for certain products many weeks and months before a supply shortage occurred.

Our Predictions

Closure of Chinese businesses and ports to curb the spread of the virus is likely to hurt economies and companies worldwide. “As the fallout of the coronavirus continues to affect the operations of multinational companies, these firms are likely to turn to other manufacturing hubs worldwide,” Rajiv Biswas, Asia Pacific chief economist at IHS Markit.

“For many global multinationals, the severe disruption of China’s industrial output has highlighted the vulnerability of their global supply chains to excessive reliance on China,” he said.

Other global manufacturing hubs in Asia and Latin America are likely to benefit as firms turn away from China to cope with demand, said Biswas.

“The experience of the coronavirus epidemic will likely further accelerate efforts over the medium term by global firms to diversify their supply chains to other manufacturing hubs in Southeast and South Asia, including Vietnam, Thailand, Indonesia, and India, as well as to other major emerging markets manufacturing hubs, notably Brazil and Mexico.”

Client driven companies use state-of-the-art Agile Supply Chain planning applications that give rapid decision support with what-if scenario capabilities. These tools allow planners to evaluate the impact of this new information – be it a supply disruption or an unexpected order – and easily compare alternative courses of action. These applications can also use algorithms to compute the best demand/supply plan given the company’s objectives, helping companies rapidly select the best course of action.

Key Strategies

The key strategies to avoid supply chain disruptions comes down to foresight, operational flexibility, and technology tools (software applications) to provide:

  • Management visibility into supply chain options on a daily or hourly basis
  • Instantaneous visibility into all supply chain sources
  • Operational flexibility to resource component requirements elsewhere
  • Notification features that offer significant lead time to make sourcing changes
  • Actionable corrective options to avoid disruptions
  • Smart sourcing decisions well in advance to prevent more expensive transportation fees from meeting your client’s delivery expectations

Summary

As the fallout of the coronavirus continues to affect the operations of multinational companies, these firms are likely to turn to other manufacturing hubs worldwide. Companies can confidentially side-step significant disruption events on their business, such as the widening coronavirus epidemic. Implementing Agile Supply Chain technology tools to provide deep insight into its multifaceted supply chain is key to operational excellence.  The Profit Point Agile Supply Chain tool helps companies minimize supply chain disruptions in part by anticipating potential problems with suppliers and making adjustments sooner rather than later. Embracing Agile Supply Chain technologies allows companies with many component suppliers to contract alternative manufactures to minimize risks and sustain shareholder value. There is technology available today to protect supply chain reliability against regional disruptions and ensure committed product delivery commitments to customers.

About Jim Piermarini

Jim has extensive experience in the chemical industry, including ten years working in a plant and twenty additional years working with businesses to improve their supply chains.

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