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Any engineer, product designer or buyer who has been waiting for things to return to “normal” with their supply chain operations will be disappointed by FreightWaves’ prognosis on that topic. In “Supply chains are never returning to ‘normal,’” the company’s CEO paints a picture of a transportation, logistics and supply chain environment that’s basically evolved into a “new normal,” and that’s not going back to the way it was anytime soon.
“The conventional wisdom at this time is that most of the world has moved on from the pandemic (except for China); therefore, supply chains will return to ‘normal,’” FreightWaves’ Craig Fuller points out. “Unfortunately, this is not the case. The world has permanently changed and supply chains are going to face continuing challenges for decades to come.”
What’s Going On?
Some of the key challenges right now include the constant threat of disruption; the fact that supply chains operate optimally when the world is “peaceful and stable”; and the conflict that exists between environmental, social and governance (ESG) goals and the optimization of supply chains for cost and speed. “If we prioritize ESG,” Fuller writes, “we will need to contend with supply chain risks.”
To engineers, product designers and buyers that are wading through these and other complexities, the balance between optimized inventory levels and positive cash flow can be difficult to achieve. When internal and/or external customers need goods that can’t be produced with a steady, reliable stream of raw materials, the supply chain can break down pretty quickly.
Here are four ways to address the current supply chain shortages and disruptions while also planning out the rest of the year:
- Work on your supplier relationships. “When your relationships are tactical, it’s easy for the supplier to move you to the bottom of the list when capacity is extremely tight. When it’s strategic and concrete, the dynamics shift,” Source Industry Group’s Dawn Tiura tells CIPS’ Supply Management. “Work with your suppliers to understand what’s most important to them. Often, there’s an area where you can give that will result in a better outcome elsewhere.” Other strategies include making select suppliers aware of just how important they are to your organization and working jointly with them to address the current and potential supply shortages.
- Improve your supply chain visibility. According to Supply Management, the pandemic revealed weaknesses in supply chains, including situations where third-tier suppliers shared the same fourth-tier supplier. Without good visibility into those lower tiers of suppliers, companies may be more vulnerable to disruptions. “It’s important that procurement leaders understand who their fourth-tier suppliers are in their supply chain,” Tiura said. “So often we see professionals diversify their third parties without understanding where their supply sources are originating. During the pandemic, we found that some of the best diversified supply chains (on the surface) had the same fourth parties – deeper supply chain visibility is a must.”
- Put on your thinking cap. From the engineering perspective, it’s easy to fall into the habit of doing things the way they’ve “always been done” and forgetting that innovative thinking about alternatives can lead to viable solutions. With the global chip shortage extending product lead times, engineer and design professionals are rethinking their product design and operating with more of a “scarcity” mindset—as in, not assuming that the components, parts and materials will be there when they need them. Just one single, simple adjustment can make a difference. During the recent chip shortage, for example, automaker Stellantis swapped out digital speedometers for analog ones in one of its Peugeot models, allowing the company to sidestep a significant production hurdle, according to Bain & Co.
- Make use of design modularity. Bain says this can pay “huge dividends,” and that leading companies should use standard approaches and flexible product architecture wherever possible, including building in additional time to test and qualify multiple acceptable parts. “They also limit the number of custom parts and rely on parts with a proven history of performance and availability,” Bain points out. For example, Acer, the Taiwanese hardware and electronics company, recently announced that it was designing a “different kind of product” that will give it a wider selection of device component resources—with the goal of countering the current chip shortage and rising semiconductor prices.
