Manufacturers across the world are dealing with disruptions in the supply chain due to the COVID-19 outbreak
With factories and businesses coming to a standstill in government-backed closures to slow the virus’s spread is testing the manufacturing supply chain. Companies need to find out who supplies their suppliers to have a complete sense of how to respond and continue the business, argues procurement advisory firm SpendEdge.
They need to be making plans to adjust their purchasing and product lines while improving their supply chain management. Rather than relying on insurance, companies must assess and devise strategies to reduce the impact of COVID-19. This includes:
Obtaining insights into supply and demand risk
The manufacturing supply side has become a major source of concern for businesses due to the COVID-19 outbreak. The inability to procure and ship supplies from vendors in China is giving rise to major inventory concerns. Companies must obtain specific insights to predict demand risk and measure supply risks through close communication with their vendors.
Mapping the supply chain
Mapping the supply chain gives executives visibility up several tiers of suppliers, as well as the logistics between those suppliers. It requires hyperlocal information and data- and information-sharing between partners. Companies should work to map the supply chain to identify the exact source of disruption and assess how to respond.
Engaging in scenario-planning
Scenario-planning is not just a strategy to deal with the impacts of the COVID-19 outbreak, but a best practice for supply chains at all times. Supply chains relying heavily on one source could benefit from buying additional inventory, despite the risk of overstocking. The more the number of what-if scenarios, the easier it is for companies during uncertainty.
Dynamic risk management
The current pandemic emphasises the need to embrace dynamic risk management, a more exquisite approach to risk. Companies must focus on obtaining results in the short-term, overlooking the long-term viability at risk because no initiatives were taken to strengthen alternate supply chains.
Diversifying supply chains
Companies must have multiple sources for products and components. No company should rely on a single source for vital components. The current crisis shows how abrupt events can take over and impact the manufacturing supply chain. This may also mean paying suppliers more for products than the prices fixed with long term suppliers. But this will provide options for companies.