Until the early part of 2020, many manufacturers were riding the high seas in blissful ignorance of the typhoon that was soon to envelop them. As a result of the coronavirus tempest, many businesses quickly folded, unable to withstand the disruptions in their supply chains and powerless to find new sources for the electronic parts and other raw materials they required. For those that were able to withstand the initial onslaught, one priority became undeniably clear: Businesses must revamp their supply chains not only to save themselves now but to avert disasters in the future.
Fatal Lack Of Diversification
Perhaps the most glaring weakness that the pandemic brought to light was manufacturers’ heavy reliance on a small number of suppliers from China, the original epicenter of COVID-19. When those providers were forced to slow down or close altogether, the clients they served all over the world were similarly brought to a halt. With no other vetted sources for the materials they needed, many companies had no choice but to fold.
The reality is that there are some sectors for whom China is currently the only source for raw materials. Only with time and a concerted effort across all players can this situation be corrected. However, companies do not need to wait until that day comes to take tangible steps that will lower their risk.
Institute Comprehensive Mapping
Tracing the procurement chain back to its source is not a linear proposition. Many companies have resisted undergoing the process of painstakingly tracing their supply chains because they are so intricate and multi-layered. However, it is only by undergoing this meticulous work that an organization can detect the weak links and predict where potential risks lie.
Invest In Digital Technology
As the global marketplace expands, the procedures that organizations have traditionally used to research and choose suppliers are quickly becoming irrelevant. Fortunately, technologies such as artificial intelligence and machine learning can provide knowledge and information that will enable companies to thoroughly research and vet potential suppliers, including newer entrants into the field with whom they do not have a prior relationship. Software and automated systems can perform scans of the entire internet within hours that would take months for a human being to accomplish. Furthermore, these systems can utilize algorithms to predict which suppliers are likely to be solid candidates and which should be passed over.
For some organizations, the pandemic has provided a wake-up call that has encouraged them to find ways to obtain the materials they need within their own countries. While they had declined to employ this strategy in the past because labor and materials costs were higher, current conditions were enough to convince them that there was something to be said for using domestic networks whenever possible. However, for companies that are primarily in the business of manufacturing electronics such as smartphones and computers, this is not always possible – at least in the short run. For them, a more practical solution is to stockpile crucial items and keep them in storage in case some sort of disaster should strike.
Correcting the gaps and weaknesses in our current supply chain system will not occur overnight. It will involve cooperation and collaboration among governments, suppliers and client companies. As the business world struggles to remain afloat in the midst of the current pandemic, it is crucial that all stakeholders begin to dialogue with each other to plan the complex steps that lie ahead.