Supplier Management: How to Safeguard Your Supply Chain in Times of Crisis

The coronavirus pandemic has severe consequences for the secure supply of goods in the manufacturing industry. Even after the end of the government-ordered lockdown, it is in no way certain that companies will be able to achieve their planned output again in the short term. Controlled, postcrisis start-up management is therefore necessary and must incorporate the impacts of the crisis.

What consequences does the crisis have for supply networks?

The global spread of COVID-19 has led to economic constraints in all major industrial nations. They have had a direct impact on the reliability of the supply of goods to manufacturing companies, since their supply chains have been interrupted at various different points. Even if Germany begins ramping up production again over coming weeks, it is currently difficult to predict whether the required components, parts, and primary products are available in the quantities needed, especially at companies with tightly integrated, global supply chains.

 

Supply chains are opaque and unstable at the moment. Decision-makers are currently barely able to gauge with any accuracy when a tier n supplier from the United States will be able to supply its products and in what quantity, whether the freight capacity required for them can be used without limitations, and what procurement alternatives there are if a supplier is unable to operate. Secondly, many companies still do not have an idea of how their supply chains and subcontractor chains are structured down to tier n level. This lack of transparency becomes very strongly pronounced during the present crisis.

 

Another roadblock is the travel restrictions which make it almost impossible to personally verify the situation of existing and new suppliers that are based internationally. Currently, it is not immediately possible to say how well a supplier from Eastern Europe or Asia could be empowered with immediate measures or, alternatively, whether a new supplier can be integrated. Instead, companies must engage someone locally who can get an idea of the prevailing conditions there.

 

The government requirements in connection with the coronavirus are highly likely to have impacts on the conditions on the factory floor itself. This applies in particular to contact restrictions. Businesses will likely not be able to restart production operations without face masks and other personal protective equipment. Whether this equipment is available in sufficient quantities is a question whose answer will have to wait, given the bottlenecks in the output of medical-technology companies.

A crisis involving many questions

Restarting production comes with risks for many companies due to the unclear supply situation. These risks could put a considerable limit on their ability to operate, even after the crisis-prompted shutdown ends. Delays in restarting and the resulting shortfalls in the production-quantity curve can involve far-reaching consequences. For this reason, decision-makers stand before a range of complex questions that must be answered quickly and prudently in light of the cost pressure created by the crisis:

 

  • What options exist if a supplier is unavailable for the time being? Can we, for example, ramp up and empower local second-source suppliers at short notice?
  • How can we design international supply chains to be more secure, using an appropriate risk assessment?
  • Is there a possibility to give new suppliers local support at short notice with fast-response teams and/or task forces active globally?
  • How can we accomplish a controlled shutdown and, later, a restart of manufacturing facilities while safeguarding supply?
  • What remote methods can help keep project work going in crisis mode?
  • What sales approach do we use to increase revenue again?

White Paper: Supply Chain Security in Times of Crisis

If you would like to find out more about how you can safeguard your supply chain security in times of crisis, we recommend you our white paper “Supply Chain Security in Times of Crisis”. It provides even more detailed information about the actions that we speak about in this post.

 

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Seven measures for controlled postcrisis restart management

To manage the manufacturing restart (and the time after it), target-oriented measures are needed and must be suitable for safeguarding supply as quickly as possible. The following seven elements with an operational focus are particularly well-suited to navigating the current bottlenecks:

1. 360-degree analysis of the current situation

Companies first need an overview of the potential risks that could limit the security of their supply. A suitable method for this is the 360-degree analysis, which visualizes all risks in the form of a matrix and assesses them using supply-chain risk indicators (SCRIs). This transparency supports the fast, structured development of risk-mitigating measures that improve the reliability of supply over the short and long terms.

2. Ramp-up and ramp-down management

A systematic, planned shutdown of manufacturing divisions is essential for manufacturing to restart loss-free. It requires judicious ramp-down management that includes a risk analysis for all affected resources (human, production tools, and know-how) and of customer and supplier structures, among other things. This facilitates planning and the implementation of operational ramp-down measures. Doing this also means that companies create the basis for adapted solutions that are tailored to the restart. Risks and losses are minimized as a result. The basis will underlie preventative measures in the future too.

Businesses can react to government restrictions that influence production even after restarting, for example, by providing protective equipment (distance sensors, protective glass, face masks, etc.). It is also plausible that the tasks worked on could be restructured based on the restart curve so that worker safety is ensured in all cases (e.g., by adjusting shift-scheduling models).

3. Create transparency in the supply chain

To ensure the security of their supply, companies must identify potential weak points within their supply chain. To do this, they need a transparent image of their own manufacturing and their supply chain. The solution is to collect and visualize all data about the company’s factory floor, suppliers, and purchased parts and organize it within a KPI structure. The objective is a standardized information platform that networks all companies within the supply chain (from tier 1 to tier n).

4. Development of inventory and progress control through dashboard solutions

Being able to react to risks and interruptions proactively is a key factor in the success of manufacturing companies, especially in times of crisis. A requirement for this is dashboard solutions that make it possible to follow and analyze material flows, stocks, and movements and supplier performance in real time. As a result, problems that affect supplies for production can be identified even before they arise. They can then also be prevented through fast, appropriate action.

5. Local fast response, task-force deployment, and resident involvement

To safeguard the availability of parts and components, companies must support their suppliers, including locally if applicable. This is difficult due to the current travel restrictions. Our consultants are active at many locations throughout the world (including in Eastern Europe, China, Mexico, and the United States), so we can offer our clients a task-force toolbox. It consists of a fast-response team that plans and implements immediate measures for foreign suppliers, a task force that carries out escalation projects, and a resident engineer who provides suppliers with long-term support mitigating supply-chain risks. This is how we build a bridge for communication. A bridge that is available globally to assess and improve the supply situation facing international suppliers.

6. Identify alternative supplier structures and develop second sources

Disruptions in a supply network cannot be fully avoided in times of crisis. That is why it is important that manufacturing companies progressively add second sources to their supplier mix in a targeted fashion. To do this, they must identify, analyze, and empower alternative suppliers. The objective is to integrate permitted and qualified alternatives into the existing supplier panel as quickly as possible.

7. Project management

The measures described here are most effective when they are accompanied by high-grade, digital, and efficient project management. Such management makes it easier to safeguard and manage remote work.

Conclusion

The consequences of the coronavirus pandemic will keep manufacturing companies busy for many months yet. This makes it all the more important for decision-makers to initiate measures as soon as possible in order to safeguard the company’s supply, even in difficult times. Such measures require a transparent overview of the processes within the supply chain. Secondly, the current situation requires clean project and restart management, alternative supplier structures, and the ability to support suppliers locally. Many risks created by the crisis can be reduced to a minimum through the above actions.