The following article comes to the Strategic Sourceror courtesy of Naseem Malik and MRA Global
There has been no shortage of discussions, opinions, warnings, and recommendations around what was usually referred to as stodgy old supply chain. Post-pandemic, that surely won’t be the case as now it seems we can’t get enough news when it comes to all things supply chain.
From my vantage point, here are all major themes around supply chain that are being assessed and discussed:
- …and probably a few more to really make things mind-numbing!
We have experts from McKinsey, HBR, The Economist, ISM, WSJ, Supply Chain Review, etc. that are espousing all the things that companies should have done and should do now to prepare for an eventuality akin to what we are currently experiencing. Personally, I like to jest by saying that all supply chain risk professionals should be taken to task for their abject failure to predict this once in a hundred-year pandemic, but that’s just me.
While we can dwell over what appears to be fairly obvious advice for companies, I think there are more interesting developments worth keeping on the radar. Lest I give it too short a shrift, let’s cover some of the more compelling issues:
Risk & Resiliency
When it comes to the risk and resiliency part, the pundits are advising to start thinking ahead to discontinuous shifts and the next normal as they move beyond the recovery phase. Some of these pedagogical assessments start with not so flowery depictions of how supply chain risk can be found at the corner of exposure and vulnerability. As heart-warming as that sounds, it doesn’t help us understand how exactly to deal with the phenomenon of risk experts underestimating the probability of such catastrophic events in the future. Needless to say, if you really want a world-class and risk-aware environment, all you need to do is build, implement and embed a strong culture of ownership within your organization that should be able to predict all types of doomsday scenarios.
Of course, you will be better served by utilizing their services as they help you figure out all these interconnected systems and navigate through global supply shocks. Since they all predict this will inevitably transpire again, best start preparing now. I know, genius.
Global & Local Sourcing
Another facet that’s been embedded in this discussion pertains to the supply crisis due to weak global and local sourcing strategies. An example cited is how almost a decade ago we had the chance to learn from the earthquake/tsunami that struck Japan. Expectation was that companies would learn and not be exposed to such weaknesses in their supply chain. Not just that, but they would also have a better plan in place for their second and third tier global suppliers. Instead, we’ve been reduced to handwringing over why we were so heavily invested in China and why the risk/benefit analysis of single sourcing didn’t help avoid this problem. Again, it wouldn’t be too much of a stretch to imagine that most of these contingencies were probably sacrificed at the altar of securing products and/or to meet competitive cost targets.
A particular example of sourcing and supplier extortion run amok came from one of our global clients, Ansell. In an interview with WSJ (4/29/2020), the CEO of this supplier of PPE described how their company will have very long memories once things subside in the next quarter or so. This Australian company was aghast to learn their supplier were marking up their regular product from 2,3 4 to all the way up to 500% in the middle of the pandemic While they immediately scrambled to find alternative sources, when they couldn’t, they had to swallow hard and reluctantly agreed. As if this wasn’t enough, they also had certain distributors they typically sold to that also added on a 100% markup to their products. That warrants them being cut off and business being diverted to their competitors. According to their info, there were 25K new companies in China producing masks. Good luck vetting that greenfield supply base – no, thanks.
Suppliers & Deliveries
There was some positive news in that the ISM Manufacturing Index had climbed slightly in May. It is noteworthy that there is a hint of distortion in the reported component delivery times. Usually this happens when suppliers are inundated with orders and cannot meet demand with business uptick. But in this case, the supply chain disruptions around the world are obviously Covid-19 related. And when it comes to inventories, instead of rising when manufacturing is hurting and orders are cratering, it did the opposite also because of the pandemic.
In Part II of this article, I’ll conclude with my favorite supply chain story of the past few months. Hint: it’s where healthcare meets the ultimate disruptor.
MRA Global Sourcing is a specialized recruiting solutions firm, placing top talent in the supply management arena including procurement, strategic sourcing, supply chain and logistics.