The below post is by David Chitayat, Group CEO of Genimex, a turnkey contract manufacturer with 50 years experience working with suppliers in China, Southeast Asia, and India. Genimex manages 250+ global brands in an array of consumer product categories from its headquarters in Shanghai and its offices in NYC, Taipei, Ho Chi Minh City. It consists of industrial designers, engineers, account management and quality control teams that support product development lifecycle for its clients. I asked David to write this post because of his extensive supply chain experience.
Most countries have voluntarily shut down large parts of their economies to prevent the spread of a deadly disease. Global supply chains are in tatters and businesses are scrambling to put the pieces back together. Though COVID-19 is in many respects unprecedented, pandemics are not, and future pandemics are inevitable. As we come out of COVID-19 lockdowns, business owners across the globe must learn from this experience and come up with survival plans for the next big disruption.
It is also important to realize that a pandemic is not the only external force that can exert pressure on your chain, causing it to snap. A natural disaster, a war, political sanctions, or civil unrest can cripple a region, cutting you off from vital supplies. The essential question is how can you make your supply chain more resilient? A chain — we have always been told is only as strong as its weakest link. Here are a few areas where your chain might be vulnerable:
- Raw materials — Are the essential ingredients of your product widely available, or does one region have a virtual monopoly? If you were suddenly cut off from your regular supplier, would you know where to get lithium for your batteries, tantalum for your microprocessors, or any other scarce resource?
- Energy — Industry requires coal and oil for production. How secure is your manufacturer’s access to energy?
- Labor — If your products require skilled laborers, how easily could you hire and train a new force?
- Infrastructure – How susceptible is the local area to an infrastructure or transportation disruption?
The first obstacle to supply chain resilience is visibility. If you are working with a contract manufacturer, you may not see past your Tier 1 supplier. Visibility into your supply chain is essential for optimizing your supply chain efficiency during routine operations and even more important during a crisis.
This brings us to the second obstacle: transparency. In working with many suppliers, it can be difficult to achieve full transparency, which should include the following:
- Building redundancies — You can arrange to have more than one trustworthy supplier to deliver the materials or perform the tasks you need done. Your secondary supplier can be located nearby or in another country altogether. Circumstances dictate which option will provide greater benefits.
- Safety stock — Keeping materials or component parts in reserve is like having a rainy-day fund. Unfortunately, too many companies view this as a misallocation of resources. That is, until the clouds gather, and the deluge begins.
- Regular risk assessments — When you see the length and breadth of your supply chain, you can periodically evaluate performance and project how stressors might impact operations in the weeks and months ahead. Key areas to consider include raw material availability, production capacity and quality, and the political situation.
This level of oversight and contingency planning is a tall order for companies that outsource their manufacturing several thousands of miles away. However, it is feasible to outsource your oversight.