Two Innovative Strategies to Mitigate The Supply Chain Crisis
“Everywhere you look, the global supply chain is a mess.” That’s how The Wall Street Journal summed up the state of the supply chain crisis after interviewing exasperated suppliers and manufacturers recently. Companies are scrambling to navigate around shipping roadblocks caused by the global pandemic, trade tariffs, Brexit and other political shifts, and severe storms in Texas and elsewhere.
Free-flowing supply chains stalled for myriad reasons—from idle factories waiting for materials, to imports held up at ports due to COVID-19 restrictions and associated staffing limits. And the impact is reverberating across industries. Shortages in semiconductors and other electronics have caused GM, Ford, and other automakers to either stop or drastically cut production until they receive backorders for these key components. And suppliers ranging from smartphones to durable goods are facing similar challenges due to electronics shortages, while biomedical firms are facing shortages of lab supplies.
A breakdown in one part of the supply chain can have a powerful ripple effect across the global economy. The tanker ship stuck in the Suez Canal held up $9.6 billion of goods each day it blocked passage, according to BBC News.
And even though the Suez Canal is now operational, tankers will still likely join a long queue of ships waiting to unload once they reach their destination. This January, more than 25% of tankers needed to wait more than five days for handling once they reached the Southern California ports of Los Angeles or Long Beach. In June 2020, only ~2% needed to wait that long, noted The Wall Street Journal.
Rethink your Supply Chain Strategy
The events of this past year spotlighted—and strained—weak links in operational strategies and associated supply chains. So, it’s not surprising that 60% of executives say the pandemic has increased their supply chain’s strategic importance, according to consulting firm Ernst & Young.
Successful companies will take steps to increase supply chain resiliency, agility, and visibility. And how companies develop new products—and optimize aging product lines through design for manufacturability (DFM)—will play a central role in determining both product profitability and supply chain resilience.
How products are designed will play a critical role in determining downstream manufacturing costs and how quickly companies can reroute supply chain operations when needed. Brands that can design new products with a readily available and interchangeable bill of materials (BOM), and optimize manufacturing and assembly, will be well-positioned to address future supply chain disruptions quickly and decisively.
Broadly speaking, there are two often underutilized strategies to strengthen supply chain operations:
1. Utilize Your Suppliers’ Specialized Design And Manufacturing Expertise
Integrate your suppliers early in the design process. This collaborative approach, called “design for supply chain,” enables the OEM to minimize the use of specialty components that may be harder to source. It also provides an optimized production process since the design will already have considered the manufacturing capabilities of the supplier.
Using digital manufacturing simulation software like aPriori provides the ability to quickly analyze different design alternatives. Quickly run those alternatives through a digital factory to produce a (DFM) report. This enables quick and accurate assessment of design variations in an effort to optimize manufacturing efficiency and cost.
2. Quickly Analyze Supplier Alternatives
When unforeseen scenarios emerge (pandemics, catastrophic weather patterns, etc.) the ability to quickly analyze supplier alternatives is vital. Without this capability, product manufacturers find themselves tragically at the mercy of the crisis.
Company XYZ has aPriori’s digital manufacturing simulation software deployed in their sourcing department. A supply chain disruption is preventing them from finishing manufacture of a new product as well as getting to market on time. Their deployment includes five different aPriori Digital Factories: one for their internal manufacturing shop in Cleveland, Ohio; one in New Mexico; two in China; and one in Brazil.
As it turns out, the supplier in New Mexico originally chosen to supply this important component has just gone out of business. In real-time, Company XYZ can quickly take the digital twin of the component (3D CAD Model) and run it through all four of the other plants. Each digital factory will deliver a highly precise report that includes the most efficient way to manufacture the component in that plant, including step-by-step operations details, and a comprehensive breakdown.
The ability to quickly analyze supplier alternatives and to act on them could mean the difference between getting to market on time and at profit, or shutting down production, as we have seen over and over again these past few months.
Enhance Supply Chain Flexibility
Agile organizations are taking a holistic approach to mitigating supply chain volatility. This starts during the product design process to address raw materials and associated BOM, and to determine the type of manufacturing for a product. An operational focus on the supply chain will also help organizations pinpoint areas to control supplier costs and support broader supply chain initiatives such as diversification and resilience.