Tag Archive: disruption

Should We Be Reshoring?

August 14th, 2020

Are you thinking about your product supply strategy? You certainly should be! I was asked to talk on Bloomberg’s “What’d You Miss?” about reshoring since it is a hot topic in the news. I was also on a webinar with other CEOs and thought leaders recently about the Future of ManufacturingThe reshoring conversation took the majority of the hour because it was top of mind for manufacturers as well.

The surveys are ‘adding up’:

  • According to an EY survey, 83% of executives expect a regionalization of the supply chain.
  • According to Supply Chain Dive, 64% of manufacturers say reshoring likely following the pandemic.
  • According to Thomas Industrial Survey, 64% of manufacturers are likely to bring manufacturing production and sourcing back to N.A.

It doesn’t matter which survey is your favorite, at least review your product supply strategy in light of your current and most likely future conditions. As I said in my eBook on product supply strategies, there are many reasons compelling manufacturers to look at this topic. A few highlights include:

  • Customer demand: Customers don’t care where we produce or source what. They expect immediate delivery of customized products and services.
  • Customer changes: Customers expect to change their orders as their customers’ demand changes.
  • Total cost: Total cost is in alignment for non-commodity products. Mexico and the U.S. provide good alternatives for customer demand in N.A.
  • Working capital: Cash is relevant.  When you account for disruptions in your end-to-end supply chain as well as changing demand, it can become a significant number to watch.
  • Risk & Disruption: Look no further than COVID-19 to understand the impacts. Asia shut down for a few months. Mexico and Europe were unable to supply essential businesses in the U.S. according to multiple panels (aerospace executives, large CPG etc.)

With all this said, as I commented on Bloomberg, NOT all situations make sense for reshoring (and certainly not at 100% by tomorrow morning). Instead, use uncommon common sense, conduct a rapid assessment and develop a strategy and path forward. Also, put triggers in place to proactively manage and adjust as needed. If you’d like to discuss further, please contact us.



Why SIOP is Critical to Thriving During & Post COVID

August 12th, 2020

COVID-19 has disrupted every business. Some are growing far faster than supply can keep up, while others have dropped like a rocket. Still, others have almost identical dollar volume yet double the number of orders at half the order size, creating significant disruption in warehousing, shipping and transportation. And yet others might have less severe changes in volume with certain customers thriving and others dormant – all creating mix disruption.

The supply side is no different. Previously reliable suppliers can be suspect at best. Previously high-quality, low-cost suppliers have skyrocketing costs as airfreight is required to keep customers’ satisfied. Risks have increased dramatically with the uncertainty of cash flow and long-term ‘institutions’ of the industry are disappearing overnight. With this high level of disruption across both demand and supply, misalignment has run rampant, costs are increasing and customers are frustrated.

SIOP (Sales, Inventory Operations Planning) Cuts through the Disruption
You know the story. The busier we get, the less we have time for improvement yet we spend double or triple the time to achieve the same outcome because we can’t set aside the time required to start or maintain an improved process. I’ve been there and am familiar with the excuses! With that said, STOP and look around you. You are on a hamster wheel with no end in sight. Implementing SIOP, even if simplified to what is achievable under current conditions, cuts through the disruption to stabilize your supply chain.

What is SIOP?
Quite simply, SIOP is about finding a way within your environment to realign demand with supply. You have to start with demand or you will forever chase your tail. To simplify the best practices across industries (aerospace and defense, building and construction products, food and beverage, healthcare products), geographies, company sizes that apply to manufacturing, supply chain, logistics and service organizations with supplies, you should focus on these keys:

  1. Proactive management of demand: Talk with customers.  Find out about your customers’ customers and every customer type within your channel until you get to the end customer (consumer, business using your product, patient). Ask about and observe evolving customer needs. Review historical trends.  And, put a stake in the ground with a starting point forecast. Outcome: typically 12-18 month rolling forecast
  2. Proactive management of internal supply: Talk with your internal teams. Understand changing capacity and staffing levels (manufacturing, warehousing). Realign temporary and contract assistance.  Understand your resiliency to changing demand (overtime, increasing staffing, efficiency improvements, maintenance and engineering support, etc.). Realign with R&D/product development requirements and your support resources. Outcome: typically a capacity plan (production, storage), high-level staffing plan and key decision plan (make versus buy, product/customer transitions, machinery and equipment plans) for at least as long as your longest lead item – 12-18 months.
  3. Proactive management of supply partners: Talk with suppliers. Find out about your suppliers’ suppliers capabilities, their likelihood to meet schedules, ability to meet cash flow needs and risk of shutdown (whether temporary due to COVID-19 or another disruption or permanent (going out of business)). Outcome: typically a sourcing and supply plan by key suppliers/ commodities for at least as long as your longest lead item – 12-18 months.
  4. Proactive management of your logistics network partners: Talk with transportation partners, brokers, 3PL/ 4PL partners and understand the extended supply chain, potential risks, possible options as disruptions occur, etc. Outcome: typically a logistics network and goods movement plan for at least as long as your longest lead item – 12-18 months.
  5. Take stock of inventory: Do you have strategic stock of critical items? Items without a robust backup supplier? Items in countries of higher risk of shutdown? Are you so busy running in circles that your slow moving and obsolete is expiring under your nose? Outcome: typically an inventory investment plan for 12-18 months.

Pre-COVID-19, clients went through a SIOP cycle with a monthly cadence. The typical processes included:

  1. Demand review meeting
  2. Supply review meeting
  3. Alignment of demand and supply (not always requiring a meeting)
  4. Inventory review meeting (often incorporated into the supply meeting)
  5. Executive SIOP review meeting (in some cases, quarterly made sense)

During COVID-19, we have taken these same concepts and adjusted to changing conditions. No two clients are alike in what makes sense to rapidly realign demand and supply and maintain this alignment.  Yet, there is one item in common across the board:

A weekly alignment on just the critical customers, internal resources, suppliers, logistics network partners and review of inventory

Read more about SIOP and related concepts in our eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19. If you’d like a rapid assessment and recommendations for your situation, please contact us.

 

Did you like this article?  Continue reading on this topic:

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What’s Going On with Asia Supply Chains

June 25th, 2020

 

Supply chains are quite tenuous, and China drives the most volume:

  1. Coronavirus: Beijing is under a soft lockdown with a surge of virus cases. Although Beijing doesn’t impact trade, it is another sign that China vastly under reported previously and it is likely to have a new surge of coronavirus and plant closures.
  2. Manufacturers in China: Small and medium size manufacturers are not doing well. They are struggling to keep up since they had to continue paying people even when they weren’t producing. Are you watching your quality and cash?
  3. Vietnam: so far, they are faring pretty well and companies that moved prior to coronavirus and quite happy with service; if they hadn’t yet moved prior to coronavirus, it is likely on hold due to the disruption.
  4. Global transportation: Volume has picked up at all 3 ports in China (although they are dealing with a short-lived vessel shortage) and we aren’t seeing goods movement issues.

International rates are rising: they are up a hefty 12% from Asia to Northern Europe & 32% on the Transpacific route. They have taken capacity out and are slow to add it back. We’ll have to stay tuned to see what will happen.

 

 

Are you taking the continued disruption into account in your supply chain plans?

 

What Should We Consider and/or What Impacts Could Arise?

Undoubtedly, you should be thinking about how to proactively manage your global footprint:

  1. Re-evaluate your sourcing strategy: as many are already doing, the least you should do is re-evaluate your sourcing strategy. Generally speaking, the total landed cost for non-commodity products is less expensive in the U.S. than in China. Check your total cost and review multiple sourcing alternatives.
  2. Review your customers’ needs: Undoubtedly, consumer and business buying behaviors are changing during these unprecedented times. What is happening with your customer base? What can you do to get in front of the changes and see opportunities for expansion?
  3. Review your customers’ requirements: Understanding where your customers are located is a good start. It can have a profound impact on your supply chain, where you should produce and how you should set up your supply chain infrastructure. In addition, what expectations do they have? Are they expecting immediate delivery? Are their preferences changing to deliver at home? These questions will have a profound impact on your supply chain setup.
  4. Understand your transportation options: Clearly, understanding the speed, cost and effectiveness of your transportation options will be integral to your supply chain infrastructure.
  5. Understand likely disruption: Do a risk assessment to understand the likely disruption and risk associated with your options. You certainly have a different situation in China vs. Europe vs. Brazil.

Read more about this topic as well as your strategy, priorities, key trends, and your restart recipe for success in my eBook,  Future-Proofing Manufacturing & Supply Chain Post COVID-19 . If you are interested in a rapid assessment, please contact us.



Are You Drinking From a Fire Hose in Managing Supply Chain Disruption?

April 10th, 2020

Every client is experiencing unprecedented disruption! Unfortunately, one had to shutdown since their product is considered non-essential. Most others continue to operate to varying levels. Most manufacturers and distributors are considered critical because they supply defense, the construction/ building industry, the food and beverage industry or the healthcare/ medical products industry.

Every client is experiencing unprecedented disruption! Unfortunately, one had to shutdown since their product is considered non-essential. Most others continue to operate to varying levels. Most manufacturers and distributors are considered critical because they supply defense, the construction/ building industry, the food and beverage industry or the healthcare/ medical products industry.

However, it is NEVER that simple. It matters the type of business/ consumer your customers’ customers serve. For example, in one of my food clients, since many Starbucks stores are closed, the products they sell into this channel are down whereas, the products they sell into grocery stores are up. And this is just the customer side of the equation. Do you know who your suppliers’ suppliers’ suppliers are? They are likely impacting your level of disruption.

Are you drinking from a fire hose, looking for ideas? Tune into our Navigating Through Volatility webinar series to get up-to-date with the latest status, gain ideas to successfully navigate the disruption and strategies to emerge successfully and well-positioned for success.

What Should We Consider and/or What Impacts Could Arise? 

Look no further than our webinars to learn more about the challenges, concerns, ideas and opportunities for navigating through volatility successfully.

Please share your stories, challenges, ideas and successes. Contact us and please join in our free webinar series and listen to our archives.

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Amazon Kicks off the New Year by Creating Disruption

January 30th, 2020

According to a Bloomberg article, Amazon kicked off the New Year by creating disruption. They have abruptly stopped buying products from some of their wholesalers, looking for ways to bypass wholesalers or push the cost to down the chain and increase profit. If your business depends on Amazon, hopefully you have been future-proofing your manufacturing and supply chain operations.

If not, you might be in a world of hurt! With that said, if you are heavily dependent on any one customer or supplier, you are in a risk-ridden situation.  It makes me wonder whether FedEx’s move away from Amazon was brilliant or whether they took on too much risk moving away from Amazon. Listen to a recent video where I refer to this topic. Are you taking these types of strategic questions into account in your 2020 plans?

What Should We Consider and/or What Impacts Could Arise?
Although the impact is obvious to wholesalers cut off by Amazon, the impacts are more widespread than that. Will Amazon be able to go direct to manufacturers? Will they be able to increase profits by squeezing their supply chain without impacting service? What happens, if that isn’t as easy as it appears? Will customers just wait? Are they getting too big or will other e-commerce players have an opportunity? It will be interesting to see.

In addition, no matter if you are related to this industry or not, it will impact you! If new players become involved, the manufacturing and logistics footprints will evolve. Will you be ready for opportunities? Undoubtedly, we will be impacted by changes in logistics infrastructure, rates and service requirements. The question is whether we will let this happen to us or if we will proactively address it. It might be too late to future-proof against this particular move by Amazon, but there will be countless more changes coming by Amazon as well as many other disruptors. Will you be ready to navigate changing circumstances and market conditions for a positive customer and bottom line impact or not?

At a minimum, continually re-evaluate your supply chain road map and think through related impacts. These topics certainly relate to our new LMA-i, LMA-Intelligence series including the Amazon Effect, the Resilient Supply Chain and Future-Proofing and contact us if you’d like an assessment path-forward plan to accelerate your bottom line and customer performance.