Originally posted in Adhesives and Sealants Industry in January of 2023
Companies must develop proactive and clear strategies that help them stay ahead of the ever-changing disruptions within the supply chain.
Although there are rumblings about the supply chain smoothing out, only the weak will ignore the new normal world of non-stop supply chain disruptions. The supply chain is a system of systems. Thus, for example, although the West Coast ports have caught up after intense focus, shippers transitioning to the East Coast ports, and the spring season of Zero COVID policy shutdowns in China, rail has been backlogged and the East Coast ports are experiencing delays.
Once rail is no longer an issue, the bottleneck could move to trucking or warehouse labor or another supply chain issue. In addition, there are many potential issues that could create new disruptions at any layer of the supply chain. For example, the hurricane in Florida caused transportation delays and manufacturing plants had to shut down temporarily. China has a new wave of Zero COVID policy shutdowns and is threatening Taiwan, the world’s main and vital source of advanced computer chips. And the war rages on with Russia and Ukraine, threatening commodities required to produce electronics and other critical products, just to name a few. The successful will switch from reactionary firefighting to proactive strategies to get ahead of these non-stop disruptions.
Supply Chain Strategies
The bottom line is the supply chain has become an excuse. Even though we are living in a new era of non-stop disruptions, we must get ahead of the curve if we want to survive, let alone thrive. Of course, it depends on your unique situation and set of circumstances; although there are several strategies that can get you moving in the right direction.
First, do a rapid assessment of your supply chain. Start by getting clear on your supply chain links or layers. Evaluate your suppliers, your suppliers’ suppliers, your customers, your customers’ customers, your products, your product supply network, your manufacturing capabilities and capacities, and your transportation partners. Identify your critical partners, your weakest links, and understand your customer and product profitability patterns. Prioritize, plan, and act.
If you are heavily reliant on manufacturing in other countries, especially those far away, unfriendly, or with governments that can dictate your success or lack thereof, rapidly assess reshoring and nearshoring opportunities (also known as friendly shoring) as well as expand capacity and/or partner with manufacturers closer to customers. If you perform a total cost analysis, it is likely to be breakeven or a benefit to pursue these options; however, don’t wait for the outcome. You must invest in your ability to control your future and secure manufacturing capacity to support your target customers’ needs.
Identify your target customers and ideal future-state customers. Determine which products and services will meet their needs this year, next year, and five years from now. Quickly assess a directionally correct path forward, and incorporate these findings into your SIOP (Sales, Inventory, Operations Planning), also known as S&OP, process. Your SIOP process will provide clarity on potential bottlenecks, decisions required (such as pricing, reallocation of capacity), and manufacturing and supply chain adjustments needed to support your growth and profitability goals.
Finally, assess your technology and human capital requirements to support your objectives. Although 90%+ of clients can better leverage their ERP system and related technologies to a greater degree to drive customer service, on-time-in-full (OTIF), profitability, and working capital improvements, it is no longer enough. Upgrading to a modern ERP system with advanced data analytics and business intelligence capabilities has become the new baseline to automate, digitize, predict, and provide a superior customer experience.
It is no longer sufficient to successfully navigate supply chain disruptions. Only the resilient and strong will survive, whereas the proactive will thrive. As the weak retire, sell, or get absorbed, the proactive will stay ahead of changing conditions with supply chain strategies and will be uniquely positioned to grow and thrive.