In the world of supply chain, we can never be too sure of what will happen next. APMEN interviewed Oliver Stein, Director at South East Asia, JAGGAER to understand how the pandemic has disrupted manufacturing supply chains and how we can mitigate the risks.
Could we have seen the global supply chain crisis coming?
Oliver Stein (OS): In the world of supply chain, we can never be too sure of what will happen next. Take the recent Suez Canal incident – who could have foreseen a 200,000-tonne ship getting stuck in the world’s busiest shipping route?
That said, it would not be wholly untrue to say that decades of taking back-office functions for granted may have contributed to the current supply chain crisis. Pre-pandemic, we saw many organisations giving far too little importance to their supply chain operations – whether this was ensuring they have the right channels and suppliers in place or digitising their back-office functions so they can rely on predictive technology tools to ensure business resiliency.
Despite the many uncertainties, the global supply chain industry can be reasonably predictable if we know where to look and manoeuvre accordingly. Unexpected events cannot be controlled, but better preparedness can make a world of difference when it comes to staying resilient amidst disruptions.
How has the pandemic disrupted APAC’s manufacturing industry supply chains?
OS: Every sector was affected in some way by the COVID-19 crisis. For the manufacturing industry, without a doubt, the pandemic caused increased uncertainty and disruption. Manufacturing, arguably, touches more transition points than any other supply chain. Travel restrictions and quarantines heavily impacted logistics capabilities for all nodes in the supply network and brought to light the challenges of having limited network diversity.
The consequences of having restricted cargo logistics, particularly in air, road and rail were certainly felt across the APAC manufacturing sector, especially in the first half of last year. While cargo movements and supply chain operations slowed down, we saw the demand for products and services going up and up. Customers were reliant on products being delivered to their door with safe distancing measures and manufacturers needed to be able to meet this demand.
Take the example of an electronics manufacturer, here in SEA. They were impacted at multiple points of their supply chain causing an almost complete halt to their delivery capabilities. The initial disruption started in their ability to source required raw materials. With a large portion of their supplier base suddenly struck down due to COVID and running at limited capacity, sourcing of their key direct goods caused their operations to nearly come to a standstill. Then, even at lower capacity, quarantine rules locked down almost all their manufacturing plants, decimating their production line. To top it all off, their main logistics paths for delivery were ocean freight based and they ended up having multiple containers stuck offshore in Singapore and elsewhere due to docking and delivery restrictions caused by responses to the pandemic. This was the worst-case scenario in terms of pandemic impact – all aspects, from sourcing to delivery, were brought to a grinding halt.
What are the lessons learnt and how can we rethink our strategies?
OS: Limited network diversity makes organisations significantly more vulnerable to disruptions – this was a lesson many organisations learnt the hard way over the past few months.
Before the pandemic, many businesses were reliant on a single country supplier base or single shipment routes for their supply chain operations. The current supply chain crisis has highlighted the importance of building out a supply base that can respond swiftly to changes. More and more, organisations are now understanding the importance of determining the supplies that are critical to business and ensuring they have a diversified supplier base they can rely upon.
Sourcing and supplier trends are changing, with focus now on far more than just price. Companies should look beyond the cheapest option when procuring items, and instead consider other crucial risk factors such as geographical limitations, ability to deliver, and sustainability. Smart procurement is already possible with today’s technology. Automation, predictive technologies, advanced analytics and streamlined workflows can all aid organisations in allocating budget more effectively and focusing on areas that will provide sustainability and resilience to their supply chains.
What can manufacturers do now to thrive despite the ongoing disruptions?
OS: Understanding the risks associated with each supplier is a key first step. Categorising them in different tiers of risk or segmenting them in terms of importance to the organisation can help in mapping the overall supply chain network. It gives manufacturers a macro view of the potential gaps that could arise from any unexpected event. However, risk assessments and regular check-ins with suppliers can be a time-consuming undertaking. Thankfully, there are many solutions available today that can help automate these regular check-ins, freeing up valuable employee time to focus on more meaningful, strategic work.
Ultimately, ensuring businesses are not caught out by similar disruptions in the future requires a shift in mentality and consideration of a move from “just-in-time” to “just-in-case” manufacturing methods. Manufacturers must adopt predictive modelling technologies to get a clearer view of their supply chains. Being aware of potential disruptions and hurdles ahead of time will be key to boosting business resilience. When supply chains are responsive to business conditions, the benefits can reach far beyond limiting risk exposure.
How can we build a more resilient supply chain for the future?
OS: Organisations can start by taking a step back and reanalysing their current supply chain functions. Key areas to consider would be base location diversity and supplier networks. Take this time to identify all the potential gaps and possible solutions to mitigate any risks.
Building a supply base that can respond to shifting conditions is crucial. With the visibility gained from identifying potential risks and opportunities to strengthen supplier performance, the next step is to look to design strategies and build relationships that drive positive outcomes. Some of these include:
- Managing by category: Not all categories are equally important. Know which ones are critical to your business and manage them strategically.
- Diversifying the supply base: Many organisations have learnt the importance of this the hard way in recent times. Expanding the list of qualified suppliers is one of the most fool-proof ways to build a resilient supply chain.
- Engaging for the long term: Squeezing suppliers to drive down costs is a short-term strategy with limited pay-off. Take the time to build a partnership that benefits both organisations and when challenges arise, the relationship will pay off.
Thankfully, there are many solutions and platforms out there that can help organisations adopt a smarter, more efficient approach to supply chain management. Picking solutions that are not one-size-fits-all but instead flexible enough to support your unique business needs and challenges will be key.
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