By Wes Keating | May 23, 2022
Along with several other members of the IMA team, I had the pleasure of meeting with manufacturing company leaders at the 2022 Colorado Manufacturing Awards in April. We were inspired by the success stories we heard in conversations and throughout the program.
Colorado's manufacturers are resilient in the face of many challenges these days, including their tenuous supply chains -- an issue that was on nearly everyone's mind that evening.
Few would argue that supply chain disruptions are hampering a more robust, less inflationary post-pandemic economic recovery. The issue is complex, though, given how it is interwoven with many other situations around the world and closer to home: the lingering pandemic, ransomware attacks, political upheaval, labor shortages and unrest, natural disasters, geopolitical conflict, extreme weather, shipping accidents, port congestion, and more.
Those not in the manufacturing trenches tend to paint a picture of a single "Global Supply Chain," when in fact there are as many supply chains as there are manufacturers and business owners.
Most manufacturers realize they cannot wait for supply chains to fix themselves. They are proactively changing their strategies and processes so they can continue to compete. Following are some of the most successful supply chain management strategies we are hearing about from them.
Revise inventory models
The days of "just in time" inventory management are over -- for the near future, if not forever -- replaced by a model characterized as "resilience," or being relatively confident that a certain inventory level can help them maintain operations. Resilience-based inventory management lies somewhere between the one extreme of "just in time" and, at the other end, maintaining large stockpiles of all necessary supplies.
Understandably most manufacturers are leaning toward the stockpile/storage strategy for key materials and components when possible and accepting the related costs and risks inherent in that strategy.
"When possible" is the key limiting factor to this approach, though, as many readers of CompanyWeek will attest. In too many cases, certain supplies aren't readily available to store and stockpile at any price.
Thus, as we'll see below, supplier research and outreach are now critical strategic functions in most manufacturer operations.
Develop redundant, closer sources
It is not easy for manufacturers to reverse their reliance on low-cost, high-volume foreign suppliers, but small, entrepreneurial suppliers are noticing a demand for "reshoring" and they're seeking to meet it. Manufacturers need to learn about these alternate sources.
For many manufacturers, supply chain evaluation and augmentation is an ongoing function, based on candid communication with their current vendors as well as outreach to potential new sources to learn about products, processes, rates, and contractual arrangements. The supplier's location and transportation options are an important part of these evaluations.
The best time to do this legwork, of course, is not in the midst of a supply emergency. Instead, manufacturers are "trying out" new suppliers in advance to determine if they might be a reliable primary or alternative supply partner.
Manage customer expectations
It is not uncommon for a manufacturer's customers to place orders in quantities more than they need and require delivery sooner than they truly need it. Like everyone else, they are hedging against future shortages and delayed deliveries. This contributes to a domino effect, though, given that manufacturers are attempting to do the same with their own suppliers.
When some manufacturers suspect their customers are asking for too much for those reasons, they are reaching out to the supplier, explaining their own supply challenge, and attempting to craft a mutually beneficial solution -- for example a multi-staged order fulfillment arrangement to ensure their customer has what they need when they need it.
These are just three approaches to supply chain management manufacturers are implementing within their operations and adapting to their unique circumstances. We applaud small and midsize manufacturers for their resilience in the past three years. We are in awe of their ability to turn on a dime and rewrite portions of the standard MBA playbook related to supply chain and supplier management.
Wesley Keating joined IMA Select in 2016 as an insurance advisor specializing in business protection plans. Contact him at email@example.com.