How Manufacturers Can Manage COVID-19 Supply Chain Disruptions

We focus on what manufacturers can do insofar as planning and execution

Let’s talk about what everyone is interested in:?Supply chain disruptions due to COVID and their impact on your suppliers’ lead times.?What you need to know is that you’re not helpless in this matter … at least not completely.?

There are things you can do to take your operation as it was pre-COVID and move it to a new regime that’s better aligned with the current supply chain environment.?This puts you ahead of the eight ball instead of behind it.

To do this, there are three levels of sophistication.?We’ll focus here only on some of things you can do with respect to planning and execution.?There are also things you can do with sourcing and looking for alternatives, but we’ll leave that to a different conversation for another time.

?The first level of sophistication would be that you simply order items with delivery dates that are more distant into the future and order quantities that are larger than you may have previously … and that’s all you do.

The second level of sophistication is that you phrase purchase orders as I just described plus you update lead times in ERP so that MRP has the benefit of knowing how long it takes to get stuff so that planning for future work benefits.

That’s better, but it is often not sufficient.

In our consulting practice, we’ve seen that companies, both small and large companies alike, tend to operate somewhere between levels 1 and 2.

The third level of sophistication is where you really need to be.? It involves advanced inventory planning. ?To practice this, you need to recognize that your lead times are not just longer, they’re also (most likely) more uncertain, which is to say they are stochastic.

So you really need an inventory planning model that is stochastic.?Almost no one does this, but that’s what you need if you want to operate effectively in this environment.

What’s more is that if you design target inventory levels based on having a certain number of days-on-hand, then that’s just not going to cut it.?Maybe you multiply D (average rate of demand) times L (lead time). ?Even pre-COVID, this is not an adequate approach and it is particularly not adequate now.

If you want to get ahead of the eight ball and operate more effectively in a supply chain environment marked by frequent delays and disruptions, then you need to take a look at getting your organization to the next level of inventory planning sophistication.

Altemir Consulting specializes in manufacturing planning, scheduling, and execution.