Over time, supply chains became more complex. Advancements in technology and navigation allows larger ships to enter ports and transport more goods with each pass. Aviation opened the door for faster trade, with critical items arriving to their destination in hours instead of days. As the internet came online for everyone, computers allowed us to track our freight in motion.
However, what hasn’t changed is our reliance on lowest-cost, single-source supply chain strategies. Although organizations of all sizes have the opportunity to map ideal networks and identify origins that balance cost with service, many companies remain fixated on having one supply chain, instead of sourcing through a supply web.
As technology gives us more tools than ever before, it’s time to break the supply chain. This period of COVID-19 disruption provides the perfect opportunity to make a transformation toward a supply web that will drive sustainable success in the future.
What happens when supply chains get too lean?
Before we turned the clock to 2020, supply chains around the world were very lean. That is: companies would order just enough inventory from overseas and relied on a soft market to get good prices on regular freight shipments.
When the Coronavirus disruption started, some businesses were unaffected. Because of the planned Chinese New Year shutdown, many ordered extra inventory to cover them through the two-week break. As the pandemic spread and disruption expanded, we started discovering the weakness of a lean supply chain: The most in-demand items, like personal protective equipment and cleaning supplies, ran out quickly, forcing new suppliers to ramp up production not out of opportunity, but out of necessity.
Although the global disruption is providing a healthy correction on inventory, it also illustrated why companies need to develop a supply web for critical components. Organizations that relied primarily on Asian sources are experiencing a much slower recovery due to the extended shutdown of Chinese factories , combined with month-long lockdowns declared by other countries in the region.
Today, sourcing must take a multi-region approach. Those companies that took a multi-region approach are able to recover faster because they were not dependent on a single supply chain. While there is no “perfect” model to prevent sourcing disruption, creating an inbound supply web can help reduce challenges. By relying on alternative network strategies mapped during contingency planning, companies can bring in components from multiple continents and experience a faster recovery and return to production and distribution.
Creating and extending the global supply web
Identifying global sourcing opportunities is only the first step in creating a robust supply web. If your previous supplier base was only in China, do you have the infrastructure available to expand beyond Asia?
Take this moment to think about how a physical web works. A web retains its strength because the tension is spread out across several anchor points and supported by internal joists between each key line. The strength of the center hub is all based on the web’s construction and proper tension at the anchor points. Build on a weak anchor, and that corner of the web could be ripped out entirely. If the internal supports aren’t strong, the web will be ineffective at best, creating a liability at the center.
The supply web works in a similar manner. Inbound “anchor” suppliers must be strong enough to support the web as a whole, while the internal “support” comes from robust transportation networks. If you rely on a lowest-cost, single-source for all your components, it can be cut off from one single support. If you only have one mode to move that freight, any industry change or a drop in partnership can cut off component movement, weakening the web as a whole.
Just as you have to think about diversifying the web for strength, distributors also need to build an equally flexible transportation system. The best systems are set up with the ability to assign preferred mode and carrier to any order at any location, ensuring the best possible contract rates.
Managing the supply web beyond your base
What does it take for a distributor to build a robust supply web? It starts with network modeling and mapping. Companies that o create multiple models to react across scenarios have more flexibility in both operations and costs. A mapping exercise allows organizations to identify best-in-class carriers and consolidation strategies that not only improve efficiency, but implement future solutions faster.
Network mapping also allows distributors to identify efficiencies they may not see within their web. As more consumers stay home and rely on e-commerce for their daily needs, a network model can identify cost-saving direct-to-consumer strategies, including distribution center fulfillment and drop-shipping from partners to reduce waste.
Creating the right network builds businesses that can outlast any disruption and continue to serve customers with the best possible solutions. How can we help you create the best network map and evolve into a supply web? Contact us today.