Last year at this time, we were hoping 2021 would restore smooth, and even improved, supply chain operations after a full year of COVID-19 chaos. Little did we know that the global supply chain would continue to experience significant challenges, both from the pandemic and impossible-to-predict disruptions like the Houston, Texas freeze.
The arrival of every new year offers a symbolic fresh start. It is through that lens that I set out to gather perspectives on the supply chain trends that defined 2021, including the growing focus on regional supply chain development, specifically how our China facility has been impacted.
In an earlier PackTalk article, we discussed the concept of regionalizing your supply chain. While this idea is certainly not new, it has become more prominent given the increased complexities of international trade. Regionalizing supply can lead to risk reduction, shorter time to market, and inventory reduction, too.
The Organization for Economic Cooperation and Development recently shared their perspective on the global supply chain, noting that “the risks associated with global value chains were revealed during the beginning of the COVID-19 pandemic, which resulted in lockdowns within China. Most global manufacturers have some operations in China, which led to disruptions in production and trade.”
According to Dun & Bradstreet, 51,000 global companies—of which 163 are large, Fortune 1000 firms—have one or more tier-one suppliers within the Wuhan, China region. Additionally, 938 companies have one or more tier-two suppliers who support that first-tier. In this instance, a regionalized supply chain (where one was in place) provided supply continuity and lessened a great deal of uncertainty for consumers and businesses alike. With that said, regionalizing your supply can present its own set of challenges, including a greater reliance on regional production, limiting the scope for products that originate domestically.
The first step in managing risk is to map your supply chain, being sure to understand and document the full supplier base. It involves working closely with your suppliers to identify constraints, bottlenecks, limitations, and other risks on a regular basis. Mapping your supply chain enables specification and classification of product risks by location and can offer a mitigation strategy for unexpected disruptions like COVID-19.
Supplier mapping techniques should be part of every organization’s risk mitigation plan. Various types of software are available to help enhance supplier mapping. Prior to going this route though, there are several basic techniques organizations can implement to build the foundation of the supplier map, including listing all suppliers by name, geographic location, capabilities, capacity information, and more. This small step can make a big impact.