Supply chain disruption is a big challenge within manufacturing right now, due to the ongoing permacrisis in the UK.
Some manufacturers are already dubbing 2023 as a make or break year – just to survive, let alone thrive.
It can feel impossible to protect your manufacturing business from risks. But you can get ahead on some aspects, and develop a competitive advantage, by investing in supply chain resilience.
To help you out, we’ve spoken to supply chain expert Professor Richard Wilding OBE.
We’ve summarised top tips from his LinkedIn course, Supply Chain Fundamentals: Risk and Resilience, so you can get ahead of internal and external challenges.
Here’s what we cover in this article:
- External challenges that manufacturers face
- 9 ways that manufacturers can stay ahead of the game
- Final thoughts on dealing with supply chain disruption
External challenges that manufacturers face
Manufacturers are facing multiple supply chain challenges in 2023:
- Supply risk: Geopolitical issues such as the ongoing Covid outbreaks in China and the invasion of Ukraine are continuing to affect the supply of raw materials, as well as assembly and testing. This has knock-on effects for supply chains worldwide.
- Brexit: Almost 75% of manufacturers disagreed that the UK-European Union trade and co-operation agreement is enabling their businesses to grow – amid increased paperwork and legislation.
- Inflation: Increases in production costs – such as wages, raw materials, energy, and transportation – are all contributing to the current high inflation. This can cause a ripple effect through the supply chain, with higher costs leading to more inflation and increased prices.
- Fluctuations in demand: This can have a domino effect on suppliers, with unexpected pressure to provide more, hold more inventory, and struggle to manage the flow of cash and information.
- Environmental risk: Manufactures are increasingly at risk of environmental events, from natural disasters to changes in environmental legislation such as further scrutiny on environmental, social and governance (ESG) performance.
9 ways that manufacturers can stay ahead of the game
Here are nine ways in which you can get ahead of your competition and keep your firm moving in the right direction during challenging times.
1. Develop and clarify your supply chain strategy
Developing a supply chain strategy will enable you to be proactive in minimising supply chain disruption, and deliver operational excellence, which will help you build trust with customers.
Work collaboratively with all parts of your business to agree processes, systems, the best set up of facilities and equipment, technologies, and teams to help you deliver on customer expectations.
A good place to start might be to look at approved standards or templates for managing supply chain risk.
These are ISO 31000, the risk management standard, and ISO 44001, the collaborative relationship management standard.
2. Establish the context of your supply chain
Next up, get to grips with what your supply chain looks like.
List and summarise the supply chains you have for key products, for example widgets for automotive manufacturers.
Use Google Maps to pin the locations of your direct suppliers, indirect suppliers, and raw material sources. The format doesn’t matter – it just has to be simple enough that anyone can understand it.
3. Identify supply chain disruption risks
From there, you can look at five key risk areas that are most likely to affect your supply chain:
- Demand side risk: Reviewing the list, are you heavily dependent on a single customer, or buyers who are in poor financial shape?
- Supply side risk: Are your suppliers based in locations that could create long lead times? Are they financially sound, or is there a risk they might go bust?
- Process risks: Look at what your customers require in terms of product quality standards, processes for secure data, communication, and management.
- Control risks: Check you’re in control of stock and regulatory compliance.
- Environmental risk: Look at whether your key sites are exposed to natural risks such as weather events, as well as issues around ESG, such as the use of child labour.
4. Analyse supply chain risks
Once you know your key supply chain risks, you can analyse and evaluate them. You may even be able to stop some problems from happening in the first place.
It’s worth running through some scenarios – what ifs – with likely consequences for your production, finances, reputation and supply chain.
Then think about the implications – how long it would affect production, the time it would take to find an alternative supplier, the need to organise alternative transport, and so on.
5. Decide how to treat risks
From there, you can implement mitigation and contingency plans to proactively reduce the likelihood and severity of supply chain disruptions.
Mitigation steps might include buying extra supplies ahead of potential price rises, diversifying your supplier base, or branching out into additional sectors.
For contingency planning, agree how you will respond in the event of supply chain incidents.
6. Design products and services for resilience
You might be able to ‘design out’ risks associated with products and services.
Try building in the option to use alternative materials or suppliers. This gives you flexibility on responding in the event your preferred choices are unavailable.
7. Communicate with all stakeholders
Changes to the supply chain can have wide knock-on effects, making people’s jobs more complex and affecting your supplier base.
Ensure your people work together to make collective decisions, which will be more effective than those made in isolation, which could result in negative outcomes.
Build and maintain strong relationships with your supply chain stakeholders to optimise communication and trust.
It’s worth putting in place shared goals to encourage co-operation and effective responses in the event of supply chain disruption. This can also help to minimise conflicts.
8. Create agility and flexibility
There’s now a wealth of technologies available to help you to manage your supply chain and make rapid strategic and operational changes in response to supply chain incidents.
Check out what’s on offer from logistics providers, shipping companies or independent cloud firms tracking the supplier base in areas such as compliance and ESG, which help to manage and validate supplier data.
Many of these systems also enable you to share information transparently with everyone involved with your supply chain, including customers and suppliers.
This ensures a quick response – and as you know, time is money.
9. Continually monitor and improve supply chain risk management
Your supply chain strategy and management shouldn’t be one-off exercises that sit in a drawer.
Make sure you continually review and update them – checking that what you’re doing is working (and adapting things if it’s not) – usually via performance reports.
Final thoughts on dealing with supply chain disruption
As a manufacturer, you might feel that you have little control at a time of significant uncertainty and unpredictability.
But you can get ahead if you follow steps from experts such as Richard Wilding – looking at what the risks are, how you treat risk, who is responsible, timeframes for action, and how you’ll monitor and review everything.
By protecting yourself from supply chain disruption, you’ll actually be protecting your entire business – and be on the front foot ahead of further disruptions.