[Report] Meeting the challenge of supply chain disruption
The past two years have demonstrated that the familiar formula of minimizing costs and maximizing efficiency in global supply chains is often no longer enough. Now, redundancy and resilience should be added to the equation to address increasing supply chain disruption.
To gauge the impact of recent disruptions and how supply chain executives are balancing this new equation, Deloitte and Manufacturers Alliance surveyed more than 200 manufacturing executives.
The study addresses the real impact executives have observed in their own businesses over the past 18 months. This paper highlights a range of new approaches and tools manufacturers are deploying as disruption becomes the norm. What emerges are four components important to a successful supplier management strategy:
- strengthening existing relationships,
- engaging multiple suppliers,
- deploying digital tools for increased visibility,
- and combining efficiency with resilience.
These may be tried-and-tested tactics, but they are now being enhanced to meet new challenges head on.
As manufacturing executives solve the current supply chain optimization problem, they are leveraging four familiar mitigation strategies to balance resilience with efficiency. But they are also wielding new skill sets and tools to manage the tougher constraints of rising costs, labor shortages, and logistics bottlenecks to achieve agility.
Strengthening existing supplier relationships to increase resilience:
- Work closely with suppliers to help them apply metrics to their Tier 2, 3, 4 suppliers
- Agree on mutually beneficial KPIs so that all parties know what to expect from one another
- Help suppliers maintain data on their suppliers’ throughput to boost transparency and assurance
- Train newer employees on relationship management
Engaging with multiple suppliers to balance efficiency and resilience:
- Correctly calculate the benefits of engaging multiple suppliers with the costs of lower margins and reduced control
- Use dual sourcing to achieve some cost control where possible, evaluating investing in development of additional suppliers in a niche market
- Have scenarios in place and alternative suppliers preapproved, conducting practice drills to make contingency plans more effective
- Locate additional production or alternate suppliers close to markets to reduce transportation costs and exposure to shipping delays
Employing digital solutions to boost efficiency and resilience:
- Implement warehouse automation in response to workforce shortages
- Move to digital solutions that increase visibility beyond Tier 2 suppliers
- Boost collaboration by initiating high-level information-sharing between all parties with the help of easy-to-use technologies
- Track potential sources of logistical disruption such as restricted routes and workforce shortages
Manufacturing executives are acutely aware of causes for both internal and external disruption and are taking steps to build redundancy into supply chains to assure business continuity. Though these efforts may lower margins, they can increase agility, reflecting the new balance that manufacturers are achieving between efficiency and resilience.
This is an excerpt from the “Meeting the challenge of supply chain disruption” study by Deloitte and Manufacturers Alliance. Read the report here.