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Insulation against supply chain instability

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Disruptions to supply chain operations are set to stay for the remainder of 2023 and beyond, be it as a result of geopolitical conflicts, inflationary pressures and the recessionary environment, climate change weather events or other issues yet to emerge. Because of this, research from KPMG has revealed that six in ten global organisations plan to invest in digital technology to bolster their supply chain processes. In this article, Stephen Hayes, managing director at automation and control technology provider, Beckhoff UK, discusses how manufacturers can increase supply chain stability.

The impacts of supply chain disruption are becoming all too familiar shortages, inflation, factory closures, goods waiting at ports to be unloaded in, and so on. These disruptions have a huge impact on a business, and not a good one. From shipping delays to complete stoppages of production, supply chain disruptions leave manufacturers facing financial losses, customer dissatisfaction, reputational damage and increased costs.

The cumulative effects of these disruptions erode a manufacturer’s competitive edge and market position. In the short term, unsatisfied customers may turn to rival brands, thereby knocking the company’s reputation for reliability and efficiency. Likewise, over time, the financial strain of dealing with supply chain disruptions can hinder investments in research, development and innovation, further jeopardising the company’s long term growth.

Therefore, it is crucial that businesses gain a clear understanding of what a supply chain disruption is and how it can affect their operations, before implementing the necessary measures to protect themselves against any uncertainties.

Diversification strategy

Some might say a diversified supply chain is simply a variety of supply and manufacturing channels to meet business needs, but it is much more than that it is the heart of supply chain resilience.

Manufacturers should minimise risk and increase agility by developing a flexible risk management strategy that involves multiple suppliers, the reimagination of manufacturing and distribution networks, and the use of redundant and multimodal logistics methods.

In fact, well known food manufacturer Kellogg Co realigned their sourcing strategy and distribution network in the wake of packaging bottlenecks during the COVID-19 pandemic. As the region’s Korean supplier ran short due to shipping delays, Kellogg Co found an alternative supplier in New Zealand, which was based closer to home and reduced transportation costs.

By diversifying their supplier base, Kellogg Co were also able to reduce the risk of relying solely on one source, helping to mitigate potential disruptions, such as transportation issues or supply shortages from a specific supplier. In addition, having multiple suppliers can also lead to competitive pricing and improved negotiation power, thereby benefiting the company and its customers.

Strengthen supplier relationships

Experiencing such smooth ordering processes, be it via your usual supplier or as in Kellogg’s case an alternative one, it is easy to assume everything is functioning well. However, making assumptions can lead to unforeseen challenges. To ensure a stable supply chain, manufacturers must actively monitor the status of their partners and suppliers and maintain a clear understanding of their relationships with them.

When was the most recent time you conducted an audit of your supply chain vendors? When did you last reach out to inquire about their well-being? Have you engaged in informal discussions over lunch to understand the changes they are experiencing in their business? While you may not have direct control over your vendors’ operations, it is crucial to stay informed about their situation and identify potential risks for your own business.

By investing in the time to sustain and develop these relationships, communication paths, mutual understanding and respect among the parties involved can be fostered. These efforts help to establish a healthy relationship between companies, allowing manufacturers to involve healthy boundaries that define how they interact with each other.

And when a manufacturer has strong relationships with crucial supply chain vendors, they are more likely to become genuine partners, actively seeking opportunities for joint success. In fact, the fruits of such solid relationships become evident during challenging times, especially when your business faces difficulties. Through supplier relationship management, business partners are more likely to demonstrate their worth and support during stressful periods.

Technological enhancements

Research from KPMG has revealed that over 50% of firms believe increased digitisation and automation will increase the resilience of their supply chains, with real-time tracking and monitoring systems able to offer insights into inventory levels, production progress and shipping statuses.

Tracking systems provide data to help manufacturers improve supply chain management by showing inefficiencies and unnecessary expenses. These systems offer visibility into the movement of goods, from raw materials to finished products, throughout the supply chain to pinpoint bottlenecks, delays, and idle times.

Stephen Hayes

As a result, supply chain managers can be immediately alerted to any problems during the supply, production or delivery process, helping businesses to act quickly before product is damaged or wasted. By closely monitoring these aspects, manufacturers are armed with data to make informed decisions that enhance their supply chain management, resulting in cost savings, improved productivity and enhanced overall performance.

Returning to our aforementioned example, Kellogg Co uses software to review disparate sources of data relating to various demand signals. When it senses a disruption, or a pattern that might lead to a disruption, it provides a recommendation on how to avoid it. This helps them to adjust and prevent an out-of-stock issue from occurring, days to weeks in advance.

Leveraging these software tools is crucial for proactively managing disruptions and building more resilient supply chains. That’s why software, such as Beckhoff’s PC-based control systems and IPCs, plays a crucial role in ensuring scalability and modularity for when quick adjustments in production and the integration of alternative suppliers are needed.

No matter the event or issue, supply chain stability can only be possible with software like this, coupled with the right operational changes. The past few years have shown us that disruptions in the supply chain are inevitable and costly, but restructuring and automating processes can reshape companies faster than you might imagined.

The author is Stephen Hayes, managing director at Beckhoff UK.

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