Recovering the manufacturing supply chain
Supply chains across the world are experiencing disruptions due to the rapid spread of COVID-19. Struggling to get their products to market, companies are dealing with shutdowns, stay-at-home policies, and concerns over the health and welfare of their workforce. Most find themselves in the process of reacting to an unplanned situation and needing urgent business continuity strategies supported by their IT divisions.
In this article, we’ll look at the manufacturing industry’s supply chain management, which sits at the center of this disruption and is predicted to be adversely impacted for months to come. How manufacturing companies respond during this recovery period will determine the health of the overall sector as well as access to the products customers need to propel the economy forward.
Impact on manufacturing
As of early last month, 35% of manufacturers were already facing supply chain disruptions. This has likely only increased with time as the disease has spread across the United States. The widespread closure of businesses means a reduced workforce to facilitate supply chains, not to mention the disruption to global production and shipping already caused by the pandemic.
The adverse effects of COVID-19 on manufacturing extend beyond just supply chain management. In the below impact index, manufacturing, along with travel and transportation, are suffering severe repercussions across the board. And for any industry with significant supply chain needs, the impacts related to that category are again severe.
Because supply chains are particularly vulnerable during a pandemic, the response to ensure their viability must be vigorous. We’ll look at some of the major reasons for this negative impact on supply chain management, and what IT leadership in manufacturing should consider as they recover and transform their businesses.
Supply chain impact
According to the Institute for Supply Chain Management, “global supply chains are impacting most, if not all, of the manufacturing industry sectors.” From electronics to construction materials, supply chains are suffering supply shortages and fulfillment issues. One of the primary reasons for these disruptions lies in the supply chain network, the web-like links between organizations that facilitate the flow of materials and goods. COVID-19 has had immediate effects on all the below:
- Availability of the workforce, including factory labor, truck drivers and other informal workers.
- Reduction of capacity at factories and plants.
- Demand shock from the consumer market, due to panic-buying and stocking of non-perishable goods.
- Shortages of materials and goods until suppliers can reopen for business and return to higher levels of productivity.
While we’ll likely continue to see negative impacts for the near term, manufacturing companies can take immediate steps to protect themselves from the fallout.
Supply chain risk management
During this black swan event, the manufacturing industry is trying to come up with a solid risk response strategy. Financials and budgeting aside, some of the key transformative steps that businesses would want to take while coming up with their risk response strategy are:
- Identifying risks/gaps in the supply chain process that pose a threat during these disruptions and mitigate those risks.
- Monitoring events/disruptions throughout the supply chain network, from raw material suppliers, intermediate distributors and handlers, to inventory and factories and plants.
- Communication, informed by accurate data and insights, with key suppliers will ensure a coordinated response.
- More and more transactions are occurring digitally, between manufacturers and supplier networks, including but not limited to purchase orders, invoicing, documentation, contracts, communications, shipment tracking, financials, etc.
- Conduct inventory run-out analysis to determine how long it would take for the inventory to run out of stock, especially for critical material resources.
- Predictive and intelligent analytics to forecast outcomes ahead of time.
These initiatives, executed with the right technologies, collectively help in the recovery process, while also creating the ability to withstand future disruptions in the supply chain. Without the right technology though, much of your scenario planning will just be guesswork.
Digital technology enablement
The ability of IT leadership to build the right tools and technologies to support the necessary supply chain initiatives will determine the degree of success a company sees during a period of recovery and transformation. But digital transformation doesn’t happen overnight. It should be treated as an evolving and iterative process.
While digital technology enablement will look different from one business to another, there are some common approaches that will help sustain a supply chain recovery process. Below are some digital enablement techniques you should be seriously considering at this time
- Digitize every business process/transaction, both on the manufacturer side as well as the supplier side. Transactions performed through digital channels act as sources of data collection from every end of the supply chain network. Mobile applications can help with asset tracking, warehouse management, shipping & logistics process, etc.
- Integrate the systems between the manufacturers, suppliers and distributors, through leading Integration and API platforms in order for the office staff in the entire network to have a connected experience and access to data at any point in time.
- Monitor the entire process end-to-end, between the suppliers and distributors, collecting data from a variety of sources. Data needs to be instantly available through visual dashboards. Having in-depth insights into the process enables communication with suppliers, allowing you to get in front of issues, such as choosing alternative suppliers for business continuity and redirecting any internal operations to mitigate any risks. There can be hundreds of channels through which data arrives. It needs to be ingested, aggregated and served appropriately to the right stakeholders, in the right format in order to monitor and make immediate decisions, and be studied and improved upon for the future.
- Automate manual business processes and transactions. Robotic Process Automation (RPA) can be applied to many supply chain processes. Especially when unprecedented events occur, routine transactions can be run using RPA bots, freeing up your staff to focus on higher-level work.
- Train machine learning models with data samples from disruptions in the process. This enables AI tools to predict disruptions ahead of time and make informed decisions. Digitizing decision-making through AI and ML tools is complex and timeconsuming. Prioritize the ones that will assist business in critical times.
- Create digital twin solutions that can model real-world supply chain processes. By simulation the business can run through a set of scenarios to determine the right path. These tools can be extremely helpful when the business needs to choose an alternative course of operation, during unprecedented disruptions. It will help in understanding downstream impacts before choosing a path.
- Implement a communications platform that enables communication with end-users for transaction updates, event/news communications with suppliers, alerts/notifications of disruptions and delays, while allowing for subscription methods for key stakeholders.
- For all the above, the most important enabler is data. Data from every node of the supply chain network, for every transaction, is essential for the above tools to be effective. The more data, the better-informed your decisions will be. More data requires more storage and computing power, which will make cloud computing inevitable, ensuring the right level of security and availability.
Digitization of the supply chain management process may prove to be the most important aspect of your risk response strategy. By pursuing cutting-edge solutions, organizations that are accelerating their digital journey will better position themselves to ride out this current disruption and be better prepared for what could be a long road back to normal.
Digitization is becoming more essential than ever, and it’s never too late to start.
See how some of our clients are responding to COVID-19.
About the author
Akash Thambiran is a technology professional with expertise in the digital space spanning over 13 years. He has built several web and mobile experiences, engineered to integrate with each other and with enterprise grade business systems through digital platforms using niche technologies. Akash is also a cloud practitioner working with businesses to make the right choices on cloud strategy, from migration to building end-to-end cloud platform solutions. At PK, Akash works closely with clients, operationalizing transformational business goals using digital technology platforms and accelerating business outcomes.Tags: AI, COVID-19, Data, Machine Learning, Manufacturing, Supply Chain