Countries pre-covid have been highly dependent on the outsourcing model for using world manufacturing hub China for cheap production. However, covid made supply chain shocks with countries locking down, demand slowing, and restricted goods movement. Covid exposed the vulnerabilities in the countries’ production strategies. Covid trade restriction impacted pharma, medical supplies, and other product exposed the weaknesses.
A new era of economic nationalism started with the U.S – China trade war, which made manufacturers worldwide increase domestic production capabilities, employment and minimize inventory holding dependent on the global supply chain. However, supply chain dependencies are not easy to replace overnight, and on top of it, consumers continue to demand low-cost goods, and competition is fierce to replace them with cheaper goods.
Companies have challenges setting the global supply chain change with resilience and not weakening their competitiveness.
Managers should take steps to mitigate the challenges of the global supply chain, and some of them are:
- Identify the supply chain dependencies
- Identify the Hidden Risks and address them
- Technical capabilities achieved in machinery and equipment
- Process standardization and economies of scale
- Production flexibility vs. different SKU to sell look for an alignment
- Holding of safety stocks and alternate channels to source
Reducing exposure in the global supply chain:·
- Process innovation
- Automation
- New edge technologies
- Other Manufacturing process innovations
CONCLUSION
Any bad state is a state of self-realization and allows us to think if it happens again, are we prepared, and then the managers look for the vulnerabilities in their supply chain and take quick action to improve them. A crisis makes them look for alternatives in the supply chain, production, labor, raw material sourcing, and how it should sell. Adopt a new vision in line with the changed scenario to build resilience and reduce future supply chain disruptions.
This article was written by Sachin Gupta and first appeared on Linkedin.
