Reducing supply chain disruption

Complex pan-European supply chains are commonplace for many UK OEMs (Original Equipment Manufacturers) and they are still struggling.

It’s been a tough last 18 months for many sectors - attributed by the?Pandemic, Brexit along with Customs, Fuel, and Labour challenges: all expected to escalate prices this year.

Having strong supply chains is vital. Prior to Brexit manufacturers made good use of the free and rapid movement of goods (components and finished goods) and cross-border trade with the EU. However, Brexit has seen disruption to UK OEMs and a rapid decrease in the efficiency and cost-effectiveness of their current operations and supply chain.

Maybe now is the right time to re-evaluate your TCO (Total Cost of Ownership) with the subsequent potential to reshore

[bring back manufacturing].

OEMs who survived the volatility of 2020 likely did so by way of enhancing their levels of efficiency, selling through inventory, and focusing on working capital.?

Supply chain challenges are likely to remain this year, to some degree - driven by increased consumer spending on products, sustained appetite for the convenience of buying online, and catch-up required from the last 18 months' bottlenecks. And yet, in spite of last year's fragile supply chain network, companies are evolving to adapt to these changes through a focus on inefficiencies and seeking to work smarter, not harder.?

Globally, the Pandemic continues to disrupt the supply chain ecosystem with new and unforeseen barriers to both productivity and profitability. Last year's biggest supply chain challenges faced by product-based businesses were:

1. Scarce materials

Since the pandemic began, consumer demand has seen increasing rises like never before. Even now, companies and suppliers alike are struggling to meet this demand in the midst of limited availability for many parts and materials. The ISM (Institute for Supply Management) reported that ‘record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices, and difficulties in transporting products across industries were key attributes.

2. Freight price increases

The need for container shipping has increased considerably throughout the Pandemic. Together with worldwide lockdown measures stimulating a surge in eCommerce sales, the response has been a greater import demand for raw materials and manufactured consumer goods (a large percentage of which are moved in shipping containers). Since this demand was much more substantial than anticipated, the resultant insufficient shipping capacity and unprecedented shortage of empty or available containers continues to trouble supply chains.

3. Demand forecasting accuracy

Accuracy of demand has added a new layer of complexity to many companies’ supply chain management during the pandemic. At the beginning of the pandemic, shattered forecasts left many suppliers without a guide as to how much inventory to stock or manufacture at any given time.?To gain much improved accuracy, supply chain managers are abandoning their bias and pursueing new data sets for forecast models, and continually refining their results.

4. Port congestion

Major bottlenecks at a number of busy global docks, due to station capacity where the loading/unloading process cannot function to plan, remains one of the top challenges for global supply chains. Clearly caused by the pandemic - port owners, carriers, and shippers alike cannot provide a viable solution to date.

5. Consumer demands

With a change in attitude and behaviours of consumers such as delivery time expectations and a continually evolving expectation for a positive customer experience; supply chains are needing to harness improved automation to meet demand with ease - not to mention optimising fulfillment requirements. eCommerce demand has been driven to an all-time high?by the pandemic.

6. Digital transformation

Systems and services intended to make ecommerce processes more efficient and cost-effective in the long run, is continually challenged by the implementation across a company’s existing supply chain. And lets face it - it takes time to restructure the organisations to enable these technologies to work in action.

The three most urgent topic cited by supply chain executives are: resilience, sustainability and digitalisation.?As a result, companies are rethinking their future supply chain set-up. Indeed, a fair proportion of supply chain executives have cited that their companies have completed a fair amount in terms of sustainability, but have now hit a ceiling and are struggling to make further improvements.?Perhaps reevaluating your TCO can help sustainability in addition to mitigating the labour challenges. Once decided to return operations

Don’t put it in the same old factory

with the same crew

in the same machines

and do it in the same fashion.

Get new equipment, train the people better, and apply enhanced efficiency principles so you have good flow through the factory. If you reshore, in many cases it will make sense to bring it back.

You see, in today’s world, companies are facing significant business challenges. So how has this impacted the financial performance of the companies in the last year alone? Aside of disruptions caused by the pandemic, the behaviour of customers and consumers is changing, traditional channels are moving towards e-commerce and an omnichannel approach, and all this is increasing the pressure on operational excellence and logistics costs.

From a performance perspective: ROCE (Return On Capital Employed) is tagged as the most crucial KPI (key performance indicator). ROCE indicates the agility and responsiveness to execute the supply chain planning whilst sustaining efficiency.

So, five tips to overcome supply chain issues:

a. Keep liquidity in your business

b. Diversify sourcing in your supply chain strategy

c. Work with a freight forwarder

d. Identify alternative shipping ports

e. Improve demand forecasting

So maybe now is the time to evaluate your supply chain's health and exposure

A vital first step is to take a step back from day-to-day operations to assess and thoroughly map your network of suppliers. Aim to identify actual and potential weaknesses in the supply chain through your TCO, particularly those that could affect critical components.

TCO accounts for known costs like material, inventory, freight, labour, indirect costs, and capital. However, accounting for the many other variables that make up the true total cost, and the interaction between them, can help drive better decision making.

• Where are the most critical items coming from?
• How vulnerable are they to bottlenecks and disruptions?
• How diversified is your supply chain?
• How sustainable is your and your suppliers' labor force given local market conditions?