Although there have been quite a few supply-chain disruptions caused by disasters, some companies still don’t put the resources into planning for these situations. There are reasons for this lack of preparation and potential solutions to ensure companies are ready for any unforeseen circumstances.
One reason that some companies decide against supply network mapping is that it can be an expensive, time-consuming task. It takes a lot of people and time to look into each supplier and those supplier’s suppliers and so on, but in the end, it is the costs and time are well worth the outcome when your company is more prepared and ready to face any challenge that arises in the future.
There are a few approaches to supply network mapping. The most common way is to use the bill of materials and look at the key components. Usually, it is the top 5 products that produce the most revenue and continue to go down by their suppliers, and their suppliers, all the way down to the raw material suppliers. The goal is to go down as far as possible because there can be critical suppliers down the line that can be critical to the company’s survival.
Your supply network map should also include information about the activities that the main site performs and other sites that could do the same action as the primary site. It should also include how long the shipping might take from the other sites as opposed to the primary site.
Something else people forget to consider when looking at the process is that cost-savings, not revenue assurance, is typically the best way to measure procurement. The method of procuring supplies is usually done with the lowest possible cost in mind. When this process has been disrupted, companies typically have to use expedited shipping or premium purchasing to cover their tracks. Supply network mapping would easily mitigate the costs associated with this disruption.
The company can best protect itself by bringing together employees from various departments, including procurement, logistics, and supply chain financing, to discuss potential disasters and their impact on the company’s operations.
Lastly, signals of supply chain disruptions should be included in supplier performance metrics. If companies include disruption-related metrics into their evaluations, they will be able to negotiate better terms for their company. Companies who add their suppliers in their supply network mapping activities (included in the contract), allows both parties to be better equipped for a disaster.
When the effects of COVID-19 start to settle, we will see some companies continue down an unprepared road, and we will see some take control of their company and begin to plan. The ones that choose to plan will likely be more successful if an event similar to COVID-19 occurs again.
At TGG, we can help your business plan for potential disruptions. Contact us for more information.