The swift pivot our manufacturing industry made during the Coronavirus disease (COVID-19) pandemic was remarkable.
Ford and GM pivoted its manufacturing might to make respirators. Dyson designed and built ventilators. Breweries and distilleries made hand sanitizer. Others partnered with a variety of firms to produce components for face shields, ventilators, test kits and more.
Those who work in procurement and supply chain management have also had to pivot, as the pandemic has dramatically disrupted many a spreadsheet model and inventory plan.
It’s not as if we haven’t faced major challenges before. We regularly navigate trade wars, tariffs, freight issues, natural disasters and more. Even before the pandemic hit, the World Trade Organization was predicting “strong headwinds” in trade volume in 2020.
However, the COVID-19 pandemic is like nothing we’ve seen before. In some cases, it has served as a wakeup call for companies and organizations to rethink and reinvent their supply chain plans and approaches. The traditional tactics of stockpiling inventory and functioning with long supply chains spread throughout the world are just not working. Instead, a supply chain approach that takes advantage of on-demand manufacturing and strategic sourcing, including, in many cases, a more regional approach functions more effectively, and not just during a public health crisis, but beyond, as we all seek that magic formula of getting the right product or part at the right time at the right price.
On-demand manufacturing — A digital outgrowth of ‘lean’
On-demand manufacturing, in a sense, is an outgrowth of lean manufacturing, a concept that grew out of Toyota’s lean production system decades ago, which was based on having minimal inventory from suppliers located nearby. That system was replicated worldwide and, eventually, instead of suppliers clustered in tight geographical areas, companies moved to supply around the globe to keep costs down, which ended up exposing companies to significant risk, as we see in our current pandemic situation.
But, thanks to the emergence of digital manufacturing, which automates the manufacturing process along the entire continuum of the manufacturing supply chain and enables dramatically faster speeds along with infinite capacity, getting products or parts “on-demand” is possible. Mass producing products with high minimum order quantity (MOQs) is no longer necessary. Instead, you can opt for on-demand production in low volumes, creating a supply chain that’s driven by customer demand, not by your supplier’s lead times.
This digitalization of manufacturing is transforming the industry. And, while many companies are taking advantage of this digital transformation, others have struggled with it. Without a doubt, the pandemic will accelerate this movement to the digital world. Indeed, the promise of Industry 4.0—the latest evolution of technology—will become a reality for many companies, with more agile, resilient and seamless supply chains a prime result of this digital transformation.
Strategic sourcing — Finding regional suppliers
In addition to using digital manufacturing’s on-demand production capabilities, companies are also turning to reshoring or onshoring options in the form of regional suppliers, using those regional sources to help mitigate the risk of global disruptions—in a sense, going back to the original lean approach, keeping supplies nearby so inventories can be kept low. Manufacturing locally, or closer to the point of consumption, has been made more feasible now with digital manufacturing.
The key question of course, which often comes up with the concept of local or regional sourcing, is the cost. Prices may be higher, so what’s the gain? Well, several things actually.
First, companies that opt for regional suppliers are not adding cost to the managing of the resources that are required for a longer supply chain, one that stretches geographies and hemispheres.
Second, companies are not investing in all of the related quality issues that inevitably emerge.
Third, companies can often reduce the time that’s required with these long supply chains. With local or regional sources, time gets condensed.
And, finally, companies are not tying up cash in those areas and in that inventory that’s spread around the world.
Beyond sourcing — Building relationships
Another benefit of regional or local supply sources is the opportunity to create and develop effective business relationships and partnerships.
Relationships can be especially critical during crisis times like now. Consider, for example, many employees working from home and other remote locations. Product designers and engineers are often now working from home, too. Yet their R&D work continues. As a result, an established relationship with a supplier in those situations can keep development and production moving.
Ultimately, navigating this crisis and future disruptions are all part of the job. But, we can meet these challenges now, in crisis mode, and into the future of a New Normal by optimizing on-demand manufacturing and strategic sources to create agile supply chains.