Over the past year and a half, organizations across industries have had to deal with unprecedented change and interruptions through numerous, massively impactful supply chain events. The Suez Canal blockage in March forced companies worldwide to find alternative routes. The semiconductor chip shortage is still creating substantial delays in the production of cars, as well as smartphones and other high-tech devices. The pandemic continues to create challenges for global shipping, with a geopolitical component that has been difficult for businesses to navigate.
In response, organizations have made supply chain resilience a priority. Many are shifting to localized sourcing. By reducing the time needed for materials to reach their destination, they’re overcoming many of the delays and barriers that have emerged during the pandemic.
The model comes with significant challenges. The transition will take time; companies will need to secure support from key stakeholders, implement the right personnel to handle the shift, and locate the required funding. It’s a major step to take, but for those willing to localize their operations for improved supply chain resilience, here are four actions to consider.
Adopt do-it-yourself manufacturing. Among the first options is to begin manufacturing products in a regionalized capacity. The efficiency and potential cost advantages of a global manufacturing footprint might not outweigh the potential impact of another supply chain disruption. Having products ready to distribute at shorter distances reduces one’s exposure to a crisis. It also decreases the chances that a problem affecting one partner could have negative consequences on the entire supply chain.
This approach comes with added responsibility. Localization means taking on certain responsibilities and resources that were previously borne by a global parts provider. It’s crucial to have support when tackling new responsibilities. Companies should prepare by seeking new partnerships, financial subsidies and specialized training for their teams to gain the necessary skills.
Identify alternative material-sourcing strategies. Companies can also boost supply chain resilience and shorten lead times by identifying local sources for materials. It’s important to note, however, that not all vital products and assets can be sourced locally, and the ones that are available might come at an increased cost. Before committing to an alternative material-sourcing strategy, leaders will have to perform detailed research on the availability, quality and price of local materials, while also identifying potential new partners and suppliers. Ultimately, they must weigh the potential costs and risks before making any decision to change sourcing strategies.
Extend supply chain visibility with real-time market intelligence. Increased supply chain visibility will also be paramount in localization efforts. As companies take on more demanding roles and responsibilities throughout regionalized supply chains, they will require strong market intelligence to optimize operations. By utilizing real-time control towers, equipped with performance data and metrics-gathering capabilities, they can gain valuable insights and protect against future disruptions.
Build your own fleet. Companies can create their own distribution fleets to assert full control over the shipping process. With the ability to transport their own products to customers, they gain supply chain visibility, improve route optimization and decrease lopsided shortages and surpluses. Major U.S. retailers grappling with the recent bottlenecks at America’s largest ports are doing just that, by chartering their own cargo ships. For organizations thinking about creating their own distribution networks, it’s vital to secure both the necessary funding and expert guidance to execute the model correctly.
None of these answers are perfect, and every solution is exposed to the unpredictability of disruptions that come in every form, from localized weather events to economic crashes. But in today’s world of uncertainty, companies can’t just sit back and assume that things will resolve themselves. By taking an active stance and seeking innovative ways to build in supply chain resilience, they can protect themselves from the effects of the next major crisis.
Vamshi Rachakonda is vice president of sales and GTM lead for manufacturing, auto, A&D and life sciences at Capgemini Americas.
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