Availability is King!

Demand exceeds supply; a shared pain across industries

Numerous examples exist today underling the importance of a robust supply chain strategy. EV manufacturer Rivian has a burgeoning order book of 90,000 units, yet has shipped less than 3,000 trucks last month, as reported in this Economist piece. In this case the impact is easy to quantity with a 2/3 loss of shares value. And they are not alone in this, several competitors are suffering from the impact of supply-side constraints.

Nor is this limited to a "chip-shortage" conversation. A recent EY report, focused on the pharma industry does a good job of outlining aspects that allowed their ability to react and serve during the pandemic (stocks "only" increased circa 17%), but most importantly, how lessons learned may be implemented to build sustained resilience.

Localization and re-shoring of supply chains likewise have been much in the news as one response mechanism to de-risking supply chains. A recent publication from the NIST states the 70% of the manufacturing firms surveyed are considering re-shoring in the next year.

In all the above examples, there is an underlying theme: can we shift the thinking from a cost management perspective to a risk management perspective?

Some Challenges

Not all supply chains are created equally, nor are all nodes to be treated equally. Localization/regionalization of manufacture will do little to increase resilience when input sourcing remains extended, and/or dependent on a severely constrained commodity or component.

Redundant suppliers of a raw material will only offer superficial resilience when all sources are dependent on the same source of "feed-stock", especially in an area of geographical challenge. This is of particular concern as the conversation around a "de-coupling" from China continues to gain traction.

Cost considerations aside, the more participants we have in a supply chain, the greater complexity in its management. Moreover there is a valid concern that a "lean and local" strategy may have negative impacts on reducing the carbon footprint of logistics.

Combine these factors with other barriers to supply diversification such as those regulatory, legal, and geo-political and it is obvious that "solving for x" in a serial fashion is not a solution for sustained results.

The approach

We at DTC Solutions advise our clients to replace the term "Supply Chain" with "Supply Eco-System", when developing supply and sourcing strategies.

After a thorough mapping and understanding of a particular product offering's issues, we were able to identify an effective hybrid solution that included:

• Identification and certification of select material equivalents and suppliers
• Most impactful points of inventory at a least cost and obsolescence risk position
• Interim stages of manufacturing enabling agile demand-specific configuration
• A logistics network providing finished good "kitting" and packaging at distribution

Within 3-6 months of implementation, the above resulted in an on-time improvement exceeding pre-pandemic levels. Yes, inventory levels did increase, however so did turns and customer satisfaction levels.

In Closing

Several outcomes of demand exceeding supply include a rise in prices and an increase in customers seeking out/accepting substitution.

1. Availability is the key if you want to retain your existing customers, protect your margins, and attract new customers through substitution.
2. Developing a strategy to create availability, in a fashion that considers all stakeholders' concerns, is the only way that will yield a sustainable solution.

Thanks for reading and should you care to learn more of how DTC Solutions can assist in these and other operations opportunities please visit our website and use the "contact us" form, or comment to this post. In all cases, we welcome the dialogue.

DTC Solutions, Inc. is a technical consulting practice specializing in providing interim leadership, change management, supply chain excellence, and skills development for manufacturing firms that are operating in highly regulated environments.