That the global supply chain is in the midst of a serious and profound shift is, by now, not a surprise to anyone. What we predicted over a year ago is now front-page news in the Wall Street Journal and has affected firms both large and small. Custom bicycle companies have extended their order lead time from three months to 18 months, and Chrysler shut down a Dodge Ram production facility because of a shortage of critical chips.
In the face of this situation, there are some critical steps for immediate action so that your organization doesn’t suffer the worst effects.
- Acquire safety stock. It might seem like an obvious move, but too many firms still haven’t attempted to buy safety stock for critical elements required in current production. If a supply problem hits you, having this buffer may give you time to react and plan your next move thoughtfully, rather than out of desperation.
- Do a detailed supply chain analysis. Have a thorough and detailed audit done of your supply chain risk. Do not accept simple assurances from your purchasing manager that “everything’s going to be just fine,” because it’s no longer business as usual. For all critical subcomponents that are not off the shelf, find out how many alternative suppliers have been vetted and passed first article inspection. Find out how many have capacity issues or may be suffering their own supply chain problems. Get the details.
- Prepare comprehensive bid packages on critical items. When disaster hits hard and you’re scrambling to find new suppliers, gathering relevant information, specifications, material sheets and drawings to get packages out to potential new suppliers creates a big delay. Time is of the essence, as it takes time to spin up production, and wasting precious weeks or months putting together a thorough package adds to the delay. Worse yet, if these packages are assembled on the fly, they may contain mistakes or obsolete items that will set you back further.
- Compile a list of obsolete parts used in vital subcomponents. Of many global firms struggling with supply chain manufacturing issues, those hit first are often those that have rare or obsolete parts built into their vital subcomponents. Because there is no long-term demand for these materials, they are often the ones dropped first by firms under pressure to produce. It is essential to know exactly what parts you have that may be obsolete, either to buy safety stock or, better yet, to contemplate a redesign of your product that uses more readily available components.
- Develop a list of alternative suppliers, with a focus on global diversity. It is no longer enough to simply do a quick Google search to see who will build your components if your current suppliers — in China or elsewhere — go belly up. Get serious about finding capable suppliers with capacity and ensure they are spread out; having global diversity within your potential new supplier base reduces geographical and political risk. Finally, make sure that you look to the United States to find alternative suppliers, because in these topsy-turvy days, those closest to home may be the best bet to save your company.
It’s a turbulent time, and the faster you address these five critical issues, the better prepared you will be to weather the storm that is already upon us.
David Iwinski Jr. is managing director at Blue Water Growth