We learn from our mistakes, right? The two major natural disasters in 2011, which resulted in several significant component and materials shipment delays and allocations, were supposed to be a wake-up call for the electronics industry, but I know there still are many manufacturers that haven’t put a supply chain risk mitigation plan in place. One thing that buyers need to realize is even if your component suppliers have global locations and aren’t directly impacted by a potential natural disaster or some other kind of disruption, their competitors could be and this causes a ripple effect in the supply chain, which will ultimately impact your supply unless plans are in place to mitigate the risk.
Today, you’re in luck. The Global Supply Chain Resiliency Council and Resilinc released a new supply chain risk management best practices guide that all folks involved in the supply chain should review and cull what they need to implement or enhance their global supply chain programs. The guide details a program to help your company avoid supply chain costs (think emergency second sourcing and expediting) and a major hit to your company’s branding during a supply crisis due to any business disruption.
The 70-page handbook, The Ultimate Guide to Supply Chain Resiliency Program Success, provides recommendations and guidance to supply chain teams on how to create, roll-out, implement, and manage a global supply chain resiliency program (SCRP). This includes providing best practices from the first step of making the business case to integrating the program into an operational plan.
It’s first important to note the definition of two key terms as defined by the guide:
- Supply chain risk: The likelihood and consequence of events, at any point in the end-to-end
- supply chain, to disrupt the normal flow of supplies.
- Supply chain resilience: The capability of a supply chain network and individual
- suppliers to recover quickly and cost-effectively from an event and with minimal or no
- impact to the normal flow of supplies.
Like any strategic program, a supply chain resiliency program starts with a plan – answering who, why, what, when, and how questions. This translates into making a business case for SCRP, establishing the scope of the program, determining how the services will be designed and delivered, deciding who the stakeholders are (the champion of the program, team players, customers, etc.), and putting a timeline in place for execution and milestones.
Once these are in place it’s time to implement the program. One of the key implementation steps, according to the guide, is supply chain network mapping, which starts by looking at your company’s manufacturing logistics footprint and tier 1 suppliers.
- Identify critical factories (owned, sub-contracted, sub-assemblies, ODMs).
- Document single source, alternate sites, and dual sources for critical products and
- Map logistics hubs and alternative routes and providers for each major lane.
- Map products through supply chain and factories.
- Identify sub-tier dependency supplier names and global manufacturing footprint.
- Consider including critical indirect materials sources by first identifying points in the manufacturing process where tooling/equipment is needed. While doing so, identify critical equipment, tooling or consumables required in the production of high-revenue impact products and determine tooling constraints such as capacity, availability and replaceability.
The guide also provides a list of potential risk mitigation measures for both short- and long-term strategies. These options range from inventory/safety stock management & daily monitoring and closer collaboration/planning with tier 1 & 2 suppliers to near shoring and vertical integration.
A key issue that the guide stresses is that a company needs to have a clear understanding of the key risks and the consequences of a disruption on a company. One recommendation is to “establish some basic parameters for determining what qualifies as a supply chain risk, vulnerability or threat that should be considered for more detailed evaluation.” At minimum, the guide recommends that companies look at risks that could prevent them from “achieving key or strategic objectives and financial goals.”
These are just a few of the highlights from the best practices guide. If you want more information, click here to download the guide.