Manufacturers’ most critical "currency" remains resolute: trust and reliability. And much of the responsibility for maintaining those qualities lies within the supply chain.
Global supply chains frequently encounter blind spots, such as failing to anticipate trade disruptions and supplier risk. The result is significant challenges for manufacturers and their customers, which neither can afford.
For example, the current global semiconductor shortage impacts automakers, smartphone companies and several other industries. Modern-day supply chains are built on low cost and efficiency, relying on “just-in-time” delivery of parts and finished goods. But when the pandemic caused a surge in demand for electronic components, traditional delivery models were unable to adapt. The time required to manufacture semiconductors, and the complexity of the supply chain, meant that suppliers couldn’t meet the demand fast enough.
The first way to avoid blind spots in the supply chain is to invest in visibility. You won’t be able to mitigate every disruption that you experience, but if you can identify the risk in advance, you’ll be able to take action much sooner.
Gaining visibility is critical to helping businesses anticipate risks in real time, whether it’s understanding a weather event or cybersecurity threat. Digitalization is necessary for supply chains to stay up to date and access real time dashboards. In addition, it brings together stakeholders to work toward the common goal of information sharing, inside and outside the organization. The stronger the collaboration and visibility between companies in a supply chain, the faster and more effectively they can respond to disruptions.
Visibility can be viewed through three primary lenses:
While identifying risks is essential, the reality is that some events are unpredictable. Take the recent blockage of the Suez Canal. There was no way to know in advance that the Ever Given would end up halting a good portion of global supply chains for weeks. Flexibility and agility are key to dealing with such a supply chain blind spot.
Supply chain flexibility is primarily a byproduct of preparation. Leading organizations create company-wide global resilience teams, tasked with diffusing risks in the event of severe threats and large-scale interruptions. This team prioritizes protection of an organization’s assets and those of its customers and partners, including human resources and intellectual property.
Companies can also set up strategic supply chain teams for specific product lines that oversee related operations. As the first line of defense when issues arise, they should constantly assess risks and collaborate closely with planning, procurement, and other groups to optimize operational shifts and decisions specific to addressing the product and customer needs.
Over time, supply chains have transitioned to becoming more centralized, a trend that creates more blind spots for industry. Certain materials have become regionalized, such as fabs, PCBs and semiconductors, which are heavily reliant on in China. This approach aligns with just-in-time models, where taking advantage of scale and scope drives efficiencies and lower costs.
However, because such a model leads to fewer manufacturers and higher geographic concentration, the subsequent risks are much higher. Consider the 2011 floods in Thailand that shut down 14,000 factories and rattled the hard-drive supply chain. Industry giants Western Digital and Seagate had a high concentration of supply chain factories in the flooded areas — nearly 60% of its drives were produced in Thailand — resulting in massive disruptions.
With decentralized sourcing, such an event can have a lesser impact on the overall supply chain.
A large part of improving visibility in the supply chain involves building strong relationships within and outside the organization. Gaining increased transparency with suppliers can help manufacturers identify blind spots early, avoid bottlenecks, and stay updated on capabilities. In cases where the disruption could not have been foreseen, strong relationships pay additional dividends in the form of shorter replenishment cycles for crucial parts subject to sudden shortages.
Supply chains will never be completely free of blind spots. The key to dealing with them is to build more resilient supply chains through strong visibility, relationships, tools, and strategies. Now is the time to reflect on potential blind spots and what measures can be embedded throughout the supply chain, from procurement to last-mile delivery, to thwart potential disruptions. Successful manufacturers maintain trust and reliability by staying one step ahead of potential blind spots, and ensuring that supply chains are resilient no matter the challenge.
Lynn Torrel is chief supply chain and procurement officer at Flex.
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