How Maximizing Efficiencies Can Minimize Supply Chain Disruption
The majority of businesses, especially manufacturers, have been experiencing among the worst supply chain disruptions they’ve seen in a long time, courtesy of COVID-19. It seems that nobody has been immune to disruption whether you’re getting your supply from China or just down the street. When your supply chain slows down, your production slows down, and that means product doesn’t get to your customers on time. In the end, it eats at your bottom line, creates frustrated customers, and generally makes life difficult for everyone up and down the chain.
Let’s talk about supply chain disruptions, what causes them, and what you can do to minimize their impact in the future. (One highly effective way to do that is by maximizing your operational efficiencies. But more on that later.)
4 common causes of supply chain disruption
It doesn’t take the worst global pandemic humanity has seen in a century to disrupt your supply chain. Here are a few common causes.
- Global health crises. COVID-19 is the worst-case scenario, but other global health crises like SARS, H1N1, malaria, Ebola and other conditions have wrought havoc with supply chains throughout the years. It’s about the impact the condition has on people, the regions where they live and work, and whether you’re getting your supply from that region. This past year, it was also about lockdowns and travel moratoriums.
- Political crises. Political unrest and strife in different parts of the world, or political ill will between this country and another, can throw a wrench into your supply chain.
- Natural disasters. Does anyone else notice that floods, fires, earthquakes, tornadoes and other natural disasters seem to be on the rise? The World Economic Forum did. According to the WEF, we’re experiencing triple the number of natural disasters today than we did 30 years ago. Last year, there were 820 major events that caused loss of homes, businesses and life. That’s enough disruption to cause severe problems for manufacturers even without COVID-19. Natural disasters can cause transportation slowdowns or stoppages, making it difficult to get goods from one place to another.
- Cyberattacks. Look no further than the lines at the gas pump all up and down the east coast in May 2021 after the cyberattack on the Colonial Pipeline to see supply chain disruption taken to the extreme.
Risk mitigation tactics
One important thing to note is, you can’t control many causes of supply chain disruptions like pandemics, natural disasters and cyberattacks. But there are pieces of the puzzle you can control. That means minimizing risk and maximizing efficiencies. Putting plans in place long before you need them can go a long way toward lessening the impact of the elements you can’t control. Here are a few ideas we’ve been suggesting to our customers.
Develop a strong Plan B. One of the lasting effects the pandemic will leave behind when it is finally a thing of the past is the knowledge that disruption can happen in the blink of an eye. Having a strong emergency backup plan needs to be job one. What this looks like for you depends on your business and your industry, but it could mean things like developing a strong network of second- and third-tier suppliers. That way, if a disaster happens in one area, which you cannot control, you’ll have a Plan B (that you can control) to get your supply when you need it.
Identify and strengthen the weakest link. What’s the weakest link in your supply chain? One way to find out is by conducting a wide variety of scenario tests, sort of an “if this happens, that will kick in” exercise. It will allow you to see where your vulnerabilities and risks lie and shore up that weak link before it causes your chain to fail.
Maximize operational efficiencies in-house. What if one of those weak links is on your own production line? You can’t control the weather, or the next pandemic, or political unrest. But you can certainly control the operations in your own house. Maximizing your efficiencies, getting lean and mean, ramping up your output and doing more with your current assets are powerful weapons in the war against disruption. When the product arrives, you can process it and get it out the door as quickly as possible.
Don’t let poor demand planning be part of the problem. Demand planning is vital in any economy, but it is elevated to an art form in the economy we’re living with right now. We recommend a SIOP system (sales, inventory and operations planning) for the most accurate, up-to-date way to calculate your inventory based on forecasted demand. Read more about it in “Did your company plan for the pandemic to end? If not, it’s not too late.”
With many businesses and industries struggling to find enough resources to handle their demand, USC Consulting Group is uniquely qualified to help businesses open up capacity with existing resources, thereby, allowing companies to more quickly satisfy customer demand. We’ve been helping companies do it for more than 50 years. If you’d like to talk about how we can help mitigate supply chain disruption risks by increasing your operational efficiency, give us a call today.