Shortages of medical equipment, sanitary supplies and even toilet paper have thrust the importance of the supply chain into daily news feeds. And while some pundits demand a retreat from global sourcing, those that work in supply chain management see things a bit differently.
While there will certainly be increased risk assessment and some changes to supply lines, the global supply chain will survive this pandemic pretty much intact, managers said, albeit with some revised strategies.
Dual sourcing lessens the blow
Some companies have not been severely impacted. Many firms that had added redundancies and diversified suppliers before COVID-19 were in a better position to mitigate disruption.
Axcelis Technologies had previously created dual sourcing for critical items, which Ken Glasser, a global sourcing contracts manager at the company, said boosted his confidence to get through the current disruption with his supply chains intact.
"We’ve been able to maintain a good flow of materials from our sources in China throughout the pandemic," Glasser told Supply Chain Dive. "There have been some slight interruptions from time to time but generally we are getting everything that we need to maintain our production schedules."
Glasser noted that some of his suppliers had recently moved manufacturing operations out of China to Malaysia and Vietnam, and that has helped with the flow of materials during the pandemic.
"There is risk in the extended supply chain we just cannot see."
Senior Quality Manager, Applied Materials
Glasser’s firm typically builds to forecast rather than discrete customer orders and that has helped maintain a consistent schedule and meet customer needs, he said. "But there is uncertainty going forward, especially if our movements get further restricted. If a shelter in place order gets enacted then the economic fallout will have a much greater impact on us and on our suppliers, especially small businesses," Glasser said.
Jim Modugno, a senior quality manager at capital equipment manufacturer Applied Materials, sees continuity of supply to be the most overriding supply chain policy going forward.
"We need to improve visibility of tier two and lower suppliers," Modugno told Supply Chain Dive. One method he suggested to enhance transparency is reshoring and bringing the critical path supply chain back to the U.S. "There is risk in the extended supply chain we just cannot see."
Supply chain pressure is on
Modugno sees many supply chain pressures caused by economics, even before the pandemic.
Margin pressures are intense, and manufacturers too quickly discontinue products that don't yield high enough margins without considering the ramifications or providing sufficient notice to customers. "That makes us scramble," Modugno said. He anticipates this will increase once companies ramp up again.
Small suppliers especially face intense pressure, according to Modugno and must innovate to keep business going.
"Those that are investing in newer technologies and can operate 'lights out' are much more competitive," and will do well once companies begin to rebalance their supply chains, he said.
"Some will consolidate and band with other companies, but some might just not survive the shock," he said.
Risk planning and assessing strategy
Mark Chockalingam, president of demand planning and forecasting consultancy Valtitude, sees the current supply issues as a result of a lack of supply chain risk assessment.
"The government and the supply chain were not fully prepared, and we are feeling the full effects of that now," Chockalingam told Supply Chain Dive. "This COVID-19 pandemic offers a wake-up call to companies who have not taken risk assessment seriously." He advised that companies should look at best-case and worst-case scenarios to guide decisions. And firms should be ready to invest in assessment and planning tools to mitigate future risk.
"This COVID-19 pandemic offers a wake-up call to companies who have not taken risk assessment seriously."
Modugno said he anticipates "recalculation in the supply chain," including a look at just-in-time and lean inventory strategies. "We have gotten much too lean over the years," he said.
Chockalingam said expects medical and pharmaceutical supply chains to adjust procurement and establish domestic sources of supply. But for the most part, he sees supply chains remaining pretty much unchanged, save for some modifications identified with additional risk assessment and strategy changes.
"Everyone seems to be forecasting massive changes to the supply chain going forward," he said. "But I don’t see it that way."
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