It is likely that all OEMs have experienced supply chain disruption at one time or another, but this past year has been an education for everyone in navigating delays, shortages and operational restrictions.
It has become clear that businesses need to have backup plans in place for times when they cannot operate normally, in order to minimise the effects of supply chain disruption. In this article, we explore some methods for navigating instances of supply chain disruption.
The first stage of preparing for supply chain disruption is to carry out a risk assessment. For many suppliers and OEMs, this past year has made clear which parts of their business are most vulnerable to the disruption caused by external factors.
Assessing the risks within your supply chain extends beyond your own business and includes identifying the points of vulnerability at each stage of the supply chain, such as the use of components made from difficult to source materials or suppliers being forced to cease operations temporarily.
Using the risk assessment, you should look to how each of the potential problems you’ve identified can be resolved. For example, creating a complete list of trusted backup suppliers for all of your products will help to prevent the disruption caused by a supplier being forced to close or struggling to get hold of materials or components.
If you use components that are made from difficult to source materials, you need to look at whether an alternative component could be used in its place, or if a different material could be used for its construction. A proactive component distributor may prove useful here, as they are experts in sourcing hard-to-find and alternative components.
Diversify your supply chain
One of the best ways to navigate disruption is to diversify your supply chain across different countries. This way, if localised restrictions to travel or trade create hold-ups for your business, you can source your components or products from one of your suppliers who are operating out of a less restricted area. Having this kind of flexible approach to supply chain management will help to counter many problems that could result from market disruption.
Maintain your cash flow
In times of extreme disruption, such as the COVID-19 pandemic, maintaining a healthy cash flow takes on even more importance. Even when a business is not generating as much revenue as it usually would, there are still bills and wages to pay, so you should evaluate your assets, sources of liquidity, and cash reserves and create a cash flow management plan.
For example, whilst holding excess stock may be good for quicker product turnaround, it will be costing you in terms of storage and you may be better served moving some of it on to increase your cash flow.
Update your business
One final way to navigate supply chain disruption is to see how you can update your business to utilise the latest technology. Advances in AI technology and IoT devices means that there are now plenty of administrative processes, such as payroll and invoicing, that can be automated or streamlined, saving businesses both time and money.
Staff that would usually be performing these tasks can be put to work elsewhere and, if you have to limit the number of employees on-site such as with the coronavirus pandemic, most of these systems can be operated remotely.
Flexibility is key when it comes to navigating supply chain disruption, but businesses need to be proactive in their approach by honestly assessing their vulnerabilities and those of their suppliers, then make the necessary changes to safeguard against these risks.
Jeff Brind is the Chief Information Officer at Rebound Electronics, a privately-owned independent electronic components distributor experienced in supply chain management.