Supply chain resilience requires more than reacting after a disruption occurs. In this Supply Chain Byte, Lisa Anderson discusses how GM is investing in supply chain resilience through a $4.5 billion inventory and financing strategy designed to protect critical parts in its supply chain. The example reinforces the critical importance for manufacturers to pay attention to their end-to-end supply chain to ensure resilience.
Companies should be thinking proactively about potential solutions for supply chain disruptions. In addition to the typical buffer of carrying extra inventory, they can consider capacity, financing, reshoring, nearshoring, alternate materials and multi-tier supplier visibility. The goal is to protect the end-to-end supply chain and ensure customer and company success.
General Motors has pursued creative strategies to protect its customers from disruptions in their multi-tier supply chain. They created a partnership with Procura Auto Parts, a third-party inventory/supply-chain management company and JP Morgan Chase and Santander to provide financing. Thus, suppliers can produce ahead and hold critical inventory for GM, and GM doesn’t have to tie up working capital immediately. When disruptions occur, their supply chain will continue to perform, creating supply chain resiliency and a differentiator from their competition.
What should companies take away from this approach?
Although the traditional planning strategies such as MPS/ MRP remain fundamental, they are no longer enough. Proactive companies are innovating. For example, an aerospace and defense manufacturer took the approach of keeping excess labor capacity (high-skilled talent) to maintain supply chain resilience. In their case, the key to navigating spikes in demand and supply disruptions was to jump into action immediately with the production capability to serve customers. In addition to holding excess labor capacity, they also provided significant cross-training and skills development so that people could move to where the bottleneck or demand was required. Thus, they grew the business when their competition struggled.
In addition to capacity and inventory, companies can pursue innovative financing strategies such as GM, innovative partnerships with core suppliers to navigate the joint end-to-end supply chain together, expanding capacity and capabilities near customers (reshoring and nearshoring), and other multi-tier supplier strategies. In A&D, customers and suppliers are connected more closely, and so there are several examples of collaborative planning strategies such as SIOP (Sales Inventory Operations Planning), advanced planning (APS) and customer partnership programs that allow the end-to-end supply chain to perform as volatility and disruptions occur.
If you are interested in reading more on this topic:
Supply Chain Visibility Fueling Faster, Smarter & Proactive Decision-Making