Knowledge is Power: 5 Risks for Major Supply Chain Disruptions
Nick Ostdick - October 06, 2016
It may as well be a four-letter word in the automotive supply chain: Disruption.
Each year, OEMs and manufacturers dedicate thousands of man hours and resources to avoiding supply chain disruptions in an effort to maintain productivity, reliability, and on-time delivery for customers. But even with the amount of time and effort manufacturers put into combating the potential for disruptions, the nature of a global supply chain is that disruptions will happen at some point along a company’s value chain, and what will determine a company’s resiliency is how said company responds and adjusts to these disruptions.
Be it large or small scale, the ability to react and correct disruptions at the production, inventory, or transportation level depends largely on understanding the kinds of disruptions and how at-risk an OEM is to experiencing each type. Given the interconnected nature of today’s global supply chain and expansive network of production facilities, warehouses, and transportation hubs, it would appear there is more opportunity than ever before for OEMs to encounter disruptions or breakdowns at more touch points across their supply network.
Whether the risks are internal (contained within a company’s operational walls and subject to mitigation by planners and managers) or external (factors outside a company’s control that can be difficult to properly prepare for, such as efficiency issues with suppliers or partners), the old mantra ‘knowledge is power’ goes a long way toward equipping OEMs to navigate and overcome disruptions while ensuring the continuation of production programs to meet customer demands.
With this in mind, here are 5 risks for potentially major supply chain disruptions OEMs should be aware of when creating contingency plans for addressing supply chain management concerns.
1). Responding to technology trends. We’ve discussed at length in previous posts the need for OEMs, manufacturers, suppliers, and other critical players in the automotive supply chain to ditch manual or Excel-based methods of demand planning, data analysis, and forecasting for integrated, intelligent planning software solutions. In an age when E2E visibility, transparency, and agility are key drivers in creating a lean, responsive supply stream, concepts like Industry 4.0, Big Data, The Internet of Things, and others are crucial to a company’s success in a worldwide production network.
Today’s biggest technology trends, particularly in planning and production allocation such as Plan for Every Part and Every Part Every Interval, allow planners to view the entire supply situation and ensure the efficiency of production programs for on-time delivery and enhanced customer satisfaction.
2). Natural/environmental disasters. Firmly rooted in the external risk camp, natural or environmental disasters are one of the most difficult disruption risks to troubleshoot yet one of the most potentially damaging. Particularly as the impact of global climate change continues to ripple throughout the world, OEMs and manufacturers need to be aware of their carbon footprint and the impact their operations have on the worldwide climate. In addition, companies must address the possibility of a natural disaster in creating and deploying their supply chain management platform.
For example, an OEM in Mexico must understand and account for the potential for an earthquake or drought and how these occurrences could damage their supply and production network, as well as proper contingency plans for maintaining production levels should these events take place.
3). Planning and forecasting. The ability to accurately plan for and forecast future demand based on past production and supply is perhaps one of the core drivers in avoiding disruption and promoting sustainable manufacturing programs. As we mentioned before, intelligent software solutions and their capacity for E2E visibility is a big part in accurate planning and forecasting, however, a fundamental understanding and strategizing of an OEMs supply situation and production capacity is also key in these efforts. Insight and understanding into the scope of a company’s production network - facility capacity, yard management, container management, and transportation management - are value-added propositions in assigning production programs to the right hub at the right time.
4). Governmental regulations. Another external risk for supply chain disruptions, governmental regulations and restrictions are quickly becoming a common hurdle companies have to overcome in their supply chain management strategy, especially as the global production network becomes more disparate and enters new and emerging markets. Taxations, trade restrictions, border controls, and labor laws are important elements planners and managers must address in crafting production and supply strategies.
For example, an OEM looking to transport component parts from a hub in Mexico to a facility in Dallas, Texas must account for additional lead times in U.S. customs inspections and regulations. Failure to address this additional stage in transportation and delivery could result in orders not being filled as scheduled.
5). Transportation/freight. Fuel costs. Route efficiency. Port complications. Chassis vs. rail. These are just a few of the issues planners and managers must consider when strategizing ways to avoid disruptions when it comes to the transportation of products and parts to customers across the globe. While detailed metrics, analytics, and reporting can be critical value propositions in avoiding freight-based disruptions and leveraging lean transportation principles, a robust transportation management strategy should include contingency plans with freight partners to ensure the continued movement of products should a disruption occur.
In addition, planners and managers must also consider container and yard management factors as they too can be critical in making sure the right component parts are in place at the right time for production programs.