Supply chain disruption is a major challenge in manufacturing right now due to the ongoing crisis in the UK.
Some manufacturers are already calling 2023 a make-or-break year to simply survive, let alone thrive.
Protecting your manufacturing business from risk can seem impossible. But you can get ahead of some aspects and develop a competitive advantage by investing in supply chain flexibility.
To help you, we spoke to supply chain expert Professor Richard Wilding OBE.
We’ve summarized the key tips from his LinkedIn course, Supply Chain Basics: risk and resilience so you can rise above internal and external challenges.
This is what we cover in this article.
External challenges faced by manufacturers
Manufacturers face multiple supply chain challenges in 2023;
- Supply risk. Geopolitical issues such as the ongoing Covid outbreaks in China and the invasion of Ukraine continue to impact raw material supply as well as assembly and testing. This has a negative impact on supply chains around the world.
- Brexit. Almost 75% of manufacturers do not agree that the UK-EU Trade and Partnership Agreement enables their business to thrive amid increased paperwork and legislation.
- Inflation: Rising production costs such as wages, raw materials, energy and transportation all contribute to the current high inflation. This could cause a ripple effect through the supply chain with higher costs, leading to higher inflation and higher prices.
- Fluctuations in demand. This can have a domino effect on suppliers, putting unexpected pressure to provide more, hold more inventory and struggle to manage the flow of cash and information.
- Environmental risk. Manufacturers are increasingly exposed to the risk of environmental events, from natural disasters to changes in environmental legislation, such as further scrutiny of environmental, social and governance (ESG) performance.
9 Ways Manufacturers Can Get Ahead of the Game
Here are nine ways you can get ahead of your competition and keep your company moving in the right direction during tough times.
1. Develop and define your supply chain strategy
Developing a supply chain strategy will allow you to be proactive in minimizing supply chain disruption and ensure operational excellence, which will help you build trust with customers.
Collaborate with all parts of your business to align processes, systems, the best design of facilities and equipment, technologies and teams to help you meet customer expectations.
A good place to start might be to look at established standards or templates for managing supply chain risk.
These are ISO 31000, the risk management standard, and ISO 44001, the collaborative relationship management standard.
2. Create your supply chain context
Next, figure out what your supply chain looks like.
List and summarize the supply chains you have for key products, such as widgets for car manufacturers.
Use Google Maps to pin down the location of your direct suppliers, indirect suppliers and raw material sources. The format is not important. it just needs to be simple enough that anyone can understand it.
3. Identify supply chain disruption risks
From there, you can look at five key risk areas that are most likely to affect your supply chain:
- Request: collateral risk. Reviewing the listing, you are heavily dependent on one customer or buyers who are in poor financial condition.
- S:supply side risk. Are your suppliers based in locations that can create long lead times? Are they financially sound or are they at risk of going bust?
- Risks of the process. See what your customers require in terms of product quality standards, secure data, communication and management processes.
- C:control risks: Check that you are monitoring stocks and compliance with regulations.
- E:environmental risk. See if your main sites are exposed to natural risks such as weather events as well as ESG issues such as the use of child labour.
4. Analyze supply chain risks
Once you know your key supply chain risks, you can analyze and assess them. You may even be able to prevent some problems from occurring in the first place.
It’s worth running through some what-if scenarios that could have implications for your production, finances, reputation and supply chain.
Then think about the consequences. how long it will affect production, the time it will take to find an alternative supplier, the need to arrange alternative transport, etc.
5. Decide how to deal with risks
From there, you can implement mitigation and contingency plans to proactively reduce the likelihood and severity of supply chain disruptions.
Mitigation steps may include purchasing additional inventory in advance of potential price increases, diversifying your supplier base, or branching out into additional areas.
For emergency planning, agree on how you will respond to supply chain incidents.
6. Design products and services for resilience
You can “design” the risks associated with products and services.
Try to create the option of using alternative materials or suppliers. This gives you the flexibility to respond when your preferred choices are unavailable.
7. Communicate with all stakeholders
Changes in the supply chain can have far-reaching negative consequences, making people’s jobs more difficult and affecting your supplier base.
Make sure your people work together to make collective decisions that will be more effective than those made individually, which can lead to negative results.
Build and maintain strong relationships with your supply chain stakeholders to optimize communication and trust.
It pays to set joint goals to encourage collaboration and effective responses to supply chain disruptions. This can also help minimize conflicts.
8. Build agility and flexibility
Many technologies are now available to help you manage your supply chain and make rapid strategic and operational changes in response to supply chain incidents.
Check out what’s on offer from logistics providers, freight forwarders or independent cloud companies that track their supplier base in areas such as compliance and ESG to help manage and validate supplier data.
Many of these systems also enable you to transparently share information with everyone involved in your supply chain, including customers and suppliers.
This ensures a quick response, and as you know, time is money.
9. Continuously monitor and improve supply chain risk management
Your supply chain strategy and management should not be one-off exercises that sit on the shelf.
Make sure you’re constantly reviewing and updating them, checking that what you’re doing is working (and adjusting things if it’s not), usually through performance reports.
Final thoughts on supply chain disruption
As a producer, you may feel that you have little control at a time of considerable uncertainty and unpredictability.
But you can get ahead if you follow in the footsteps of experts like Richard Wilding. looking at what the risks are, how you deal with the risk, who is responsible, the timelines for action and how you will monitor and review everything.
By protecting yourself from supply chain disruptions, you’ll actually protect your entire business and stay ahead of future disruptions.