COVID-19 has disrupted supply chains all over the world, and that of communications giant AT&T was no exception. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Susan Johnson, Executive Vice President of Global Connections and Supply Chain, explains how the pandemic has served as a wakeup call for AT&T about the need to diversify sourcing and achieve better visibility of its entire supply chain.
SCB: How have you changed your sourcing strategy at AT&T as a result of the coronavirus pandemic?
Johnson: We've had to go from reactive to proactive. Luckily for us, we started back when the Chinese tariffs were sitting in front of us. That caused us to track where all of our key supplier manufacturing sites were, where all the components were coming from, and where they were being assembled, so we were probably six months ahead of the pandemic in having a good understanding of where all of our equipment was sourced and manufactured. But with the pandemic, we had to get out of reactive mode. We all watched what happened when factories in China didn't reopen after the Chinese New Year, and we had to get very proactive in working with suppliers on building up buffer stocks. We had to figure out how we were going to get in front of the challenges as the pandemic started to shut down borders and manufacturing on a rolling basis, country by country. We all woke up and realized very quickly that intelligence and data were critical. Then it was a question of understanding where the hit was going to come from, and developing a plan with our suppliers before that happened.
SCB: How has that changed the company’s actual strategy? Does it mean that you’ve changed sourcing locations, engaged in some degree of supplier diversification, or taken any other actions as a result of achieving this understanding?
Johnson: Absolutely. Having watched supply chains for a while, we tend to go through this balance between cost and efficiency being paramount on one hand, to resiliency and redundancy on the other. We started getting more diversity in sourcing, moving to Vietnam, Taiwan and Mexico from China and other countries where we were probably too single-threaded. In addition, we sought greater redundancy across the supply chain with multiple suppliers, to make sure we had more flex in the system to get out in front of COVID-19, and better intelligence too. Most of the industry is working on achieving better supply-chain visibility. We've all learned that it’s fundamental to your ability to be more proactive, and understand where you’re single-sourcing.
SCB: If you're spreading the business around, maybe you're not getting quite the same deals with suppliers that you were before, or it's costing more because you have to duplicate capabilities in another part of the world. Is there a downside to supplier diversification?
Johnson: There is. That's why I say it's a balance. It doesn't mean we don't care about cost or efficiency or aggregating our purchasing, but the balance is shifting more toward resiliency and redundancy in the supply chain. In many cases, my suppliers are acquiring buffer stock or dual sourcing, which I know is driving up incremental costs. But we've all learned that the risk was too great from the way we had been working for the last five years.
SCB: What role might technology, and specifically machine learning, play in streamlining your operations, and helping you to anticipate the impact of future global events?
Johnson: One of the things we’ve started, and are pushing our suppliers to get on board with, is a single platform where we've got better visibility of manufacturing sites and where the components are coming from. Chip structure has been a big issue across the industry for the last couple of years, and machine learning allows you to adopt proactive strategies to get out in front of it. We've just started asking many of our suppliers to get on an outside platform that we’re sponsoring. That gives us visibility, not just of our own supply chain, but into our supplier's supply chain as well.
When you’re doing a stress test of the resiliency of a supply chain, so much of it is about the intelligence. Do you understand where your supplier's components are coming from, and where they're manufacturing? By applying machine learning, you can judge the overall risks across the supply chain, which sometimes we don't see until after the fact.
SCB: With so much data out there that's relevant to your situation, do you find that machine learning, and maybe even artificial intelligence, allow you to make sense of it in a way that humans simply can't do?
Johnson: That's a hard question to answer. We're putting a pretty narrow lens on it right now, meaning that we don't have all of the data feeding through to drive artificial intelligence. Where do I know what my biggest risks are? What are the key components of my supply chain? We're starting to use machine learning, and are focusing A.I. on a couple of categories, but you've got to crawl, walk, run.
SCB: With this intense amount of attention being paid to visibility, resilience and cost, it’s been said that there’s a danger that companies might be taking their eye off the ball with regard to sustainability. How can you incorporate sustainability into all these other considerations, and keep moving forward on that front?
Johnson: It's always such a balance, with many competing priorities. I do think sustainability is fundamental, and we’re still focusing on things as basic as packaging sizing when we deliver devices to our stores and customers. Sustainability is obviously a long-term project that we’re working on. Every time we source a new component or set up a new dynamic with a supplier, we’re thinking about it. But I do think there’s a little less urgency around sustainability. Right now, we're focused more on the resiliency and visibility of the supply chain, although we’re also thinking through the sustainable nature of those decisions.
SCB: This all appears to be leading to a permanent change in your sourcing strategy, as well as those of many companies today. I imagine you’ll be looking to keep improving your supply chain going forward, even after the pandemic.
Johnson: I totally agree. I'm having conversations with all of my suppliers, saying, "I need more visibility in your supply chain." I don't know that they would have been open to that even 18 months ago — they would have said, "We're serving you well, meeting all your SLAs and KPIs. We're good." But now I'm having urgent conversations with them, saying, "We’ve all learned a lot over the last year. We need better visibility. You've got to have more trust on both sides that we're using that data for the right reasons and we’re not calling your underlining component suppliers or stealing any of your intellectual property." I do think that the pandemic is driving more collaboration across the industry, given the urgency and the challenges we've all experienced. The challenge for all of us now is to do better and not reenter into a COVID-19 situation, but to know that we're smarter coming out of it. Never waste a crisis, right?
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