Supply Chain Disruptions due to Covid-19.

I bought a motorcycle in the first week of March. Earlier, the salesman from the dealership called me and offered me a discounted price rather than the regular MSRP. Two weeks later, I went down there to get it but there was a surprise for me. He denied the promised discount quoting that due to the Covid 19 their supply from Indonesia has been cutoff. He even told me that they are not even sure if they will be open in few weeks or not. According to him, they will have to wait till the things get back to normal since they did not have enough inventory to operate in times like this. 

This brings me to the story, “Disruptions in the supply chain due to inevitable events like Covid 19”. This pandemic has shown that the Supply Chain network is vulnerable specially for the companies which rely on other countries for their products. In this case, most of the companies dependent on Asian markets like China, Vietnam, Malaysia, Indonesia and India have been hit the hardest. These market account for majority of manufacturing companies across the world and occupy a lion’s share when it comes to primary suppliers for companies operating in countries like USA and Canada. 

To overcome situations like this and to ensure minimum disruptions, the companies need to follow this quote “The more you sweat in peace, the less you bleed in a war.” To put it in simple words, the companies need to be prepared in advance so that they can avoid the Supply chain disruptions during events like this. This can be done by practicing the following business strategies:

Domestic Supplier backups: Have the supplier selection and vendor evaluation done with an updated list of to go suppliers operating domestically. This might drive the cost little higher in the short term but reduce the risk of upsetting the valuable customers because of lost sales during pandemics like this. With lower lead times, higher inventory turns can be achieved resulting in lower inventory costs. Refrain using single source suppliers.

Material planning: Predicting the demand and ensuring enough stock availability is the key. Achieving higher level of forecast accuracy can help in ensuring timely procurement of optimum quantity of material. If you are planning a companywide inventory reduction, make sure safety stock is what drives it. Safety stock is the cushion that can help you get out of situations like this. Establish your safety stocks keeping in mind your lead times and forecast.

Supplier development: Treating your supplier as your partners gives them a feeling of implied accountability where meetings your customer’s orders becomes their goal as well. Keep them posted about your future plans and help them build the strategy to meet those plans by utilizing their available capacities. Sharing the anticipated demand numbers with them can provide a heads up to them enables them to have their material planning done in advance. 

Risk assessment: No business is untouched when it comes to risk. Have a strategy to manage it. Develop strategies on how to avoid it, mitigate it, transfer it or accept it. Risk registers and trackers should be maintained to use as lessons learned. These lessons bolster the operations improvement efforts in the long run and help in being prepared to uncertainties and future risks.

Lead times and order cycles: You should understand supplier lead times in order to better plan when items will reach the shelf. Delivery time can be impacted by factors like country of manufacturing, mode of transportation used, capacity of manufacturing vendors etc. Plan the reorder points so that the material can be received at the right time, at the right price, of the right quality in in the right quantity. 

Communication is the key, especially in days like this. Let it be known to the customers that you are doing your best to meet their expectations and are going beyond the boundaries to make things happen for them.  This way, the customer is prepared for what is coming and would appreciate your efforts. With global market shutdowns, it is understandable that disruptions are bound to happen. All that matters now is to lower those disruptions.

Pic Courtesy:areadevelopment.com