Supply Chain Resilience Starts With Transparency
Amid ongoing issues related to the COVID-19 pandemic — which most recently have taken the form of a global chip shortfall that has the attention of lawmakers around the world — there is renewed focus on the importance of manufacturers building and maintaining long-term relationships with their suppliers and EMS providers.
Continuing the Conversation on Supply Chain Resilience
Supply chain resilience and business continuity have always been indicators of supply chain success, but extending inventory lead times and shortages are bringing these topics to the forefront of international conversations. Indeed, resilience is a key focus on the current United States administration’s most recent executive order regarding U.S. supply chains. “The United States needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security,” reads the order. “Resilient American supply chains will revitalize and rebuild domestic manufacturing capacity, maintain America’s competitive edge in research and development, and create well-paying jobs.”
The White House continues: “More resilient supply chains are secure and diverse — facilitating greater domestic production, a range of supply, built-in redundancies, adequate stockpiles, safe and secure digital networks, and a world-class American manufacturing base and workforce.”
On the other side of the coin, the consequences of not emphasizing supply chain resilience can be significant. According to a recent study by the McKinsey Global Institute, a company could expect to lose an average of 44% of one year’s profits over the course of a decade as a result of supply chain disruption. Despite this, only 54% of the study’s respondents claimed they don’t have clear visibility of their supply chains past the Tier 1 level. Thankfully, 98% of respondents also claimed they expected their organizations to take steps to becoming more resilient.
The Link Between Supply Chain Resilience and Transparency
A transition to a more resilient supply chain begins with transparency. By itself, transparency is an increasingly important capability for companies,” said a recent report by Deloitte titled “The Path to Supply Chain Transparency.” “But as part of a company’s broader attempts to build supply chain resilience — the ability to recover from and reduce the impact of key risk events — transparency’s role is pivotal.”
A good place for manufacturers to start improving transparency would be to remove any unneeded friction between OEMs, EMS providers, and suppliers. With the help of a Partstat inventory management solution, for example, OEMs have an option to seamlessly transition payment obligations for last time buy inventory away from their EMS partners — a common point of tension — without loss of any upfront working capital. Suppliers also love the use of Partstat inventory management solutions because it allows them to realize payment for large bulk orders upfront — and due to reduced production costs, it also gives commonly gives them the option of offering their manufacturer customers bulk purchase discounts.
The manufacturing process is a team effort that requires buy-in from all parties at all supply chain levels. It requires trust, and a commitment to promoting a culture where process and policy integration is encouraged between partners. Absolute supply chain transparency is not a goal manufacturers will meet overnight, but it is one that is worth pursuing in both the short and long term.