How your Supply Chain could have been better prepared for epidemics like Coronavirus

I have received few requests asking for my 2 cents on learnings from Coronavirus epidemic impact on Supply Chains so here we go (I will skip the part on risk management actions taken DURING the epidemic but focus on what could have been proactive measures):

• Being lean is not about minimizing inventory (among other “wastes”) to the bare bones. Lean in my world is having just the right inventory in your flows, that will align with all strategic scenarios- including this one. Having some excess inventory on hand would have helped. There is math behind how much inventory you should hold for a particular type of risk as well.

• Obsession with cost minimization as the objective function in Network Designs also needs to go away. It is such a tribal approach and is actually a result of lack of will to ponder over exhaustive network design scenarios. Your footprint and the types of lanes you keep open between your nodes can rescue you in situations like these.

• Obviously a focus factory manufacturing network is more cost efficient as compared to a felxible manufacturing setup but can create mayhem in your Supply Chain in such instances. Develop a manufacturing network that can “flex” to accomodate disruptions like this.

• This is where additive manufacturing could have worked its magic to eliminate parts shortages. In a webinar I did last year, I suggested that every major manufacturing organization MUST HAVE a 3D printing facility as a backup for their critical parts, to handle scenarios like this.

• An article in Forbes suggested that having a self driving Supply Chain powered by AI, Blockchain (and every other buzzowrd) could have helped companies avoid disruption from Coronavirus. I would suggest exactly the other way around- even 20 years from when these technologies will be ubiquitious. Scenarios like this are when you take back control and go in “Manual mode”.

Now epidemics likes these are not “usual” but remember that we are now in era driven by customer satisfaction. The priority becomes that your customer gets the same quality without any disruptions, that you retain your customers and your brand’s goodwill. Read here how Toyotal lost customers for long term after Tsunami in Japan:

https://www.cbsnews.com/news/how-the-japanese-tsunami-changed-the-auto-industry/

The paradigms have changed vs when TPS was the “in” thing. Every lean company…even the best in class like Toyotas of the world, run into part shortages every year. I know a Detroit based Tier 1 auto supplier that ran lean, and would then spend a significant amount to rush parts from alternate sources when sh** hit the fan. The holding cost of those parts plus the space cost and every other cost thrown in was less than 10% of what they were incurring to keep themselves “Lean”.

Alternate suppliers that you can use to source “one time” kind of get accommodated in the flexible manufacturing. Unless you are running out of fasteners, chances are that parts shortages are for strategic parts so spot buying does not work effectively. You have to identify these alternative source nodes early on, in strategy design, and them build a strong strategic relationship even with these alternative suppliers in order to leverage them effectively during crisis. Remember that if you have not built a strategic relationship, they are swamped with requests from other companies as well during times like this.


 

Views my own.

 

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