Bill Currence, president and managing partner of Cornerstone Consulting Organization, discusses the factors that are both beyond and within the control of manufacturers suffering through the current supply chain crisis.
Manufacturers the world round are being impacted by a shortage of semiconductors for incorporating into high-tech products. Could they have avoided this state of affairs? Currence says many of the factors that created the crisis lie beyond their control. Even companies with the best protocols were caught short by an event of global magnitude.
Nevertheless, he says, certain policies that were well within manufacturers’ control have exacerbated the situation — most notably the just-in-time production strategies that left companies without adequate buffer stock when plants shut down due to COVID-19. “Certain industries need inventory to protect themselves,” he says.
The fallout from the current crisis will likely include a distancing from what Currence calls “Lean fanaticism.” The lesson is the danger of “taking Lean and JIT inventory too far.” In addition, expect to see more localization of sourcing, with some production returning from China to Mexico, Canada and even the U.S. In the years ahead, supplier diversification will be key.
One might expect a near-shoring or reshoring strategy to entail additional cost, but Currence says the difference between that and production in Asia isn’t as much as companies might assume. Highly industrialized countries offer the ability to embrace automation as a means of reducing production expense.
At the same time, manufacturers must accept the need to increase wages for human workers, and pass those increases on to consumers in the form of higher prices. The tools for mitigating the impact of future disruptions are available, Currence says. “It’s just having the leadership and courage to execute on those things.”
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