Supply Chain

Flight, Fright, or Freeze: Manufacturers in an Uncertain World

May 15, 2020

Build an ecosystem of trust and empathy along with being well prepared to respond to improbable and chaotic black swan events such as COVID-19.

A 4-part blog series on how manufacturers can thrive in the next normal. 

Since the turn of the century alone, the world has witnessed multiple, inherently unpredictable, and highly improbable events. The current global pandemic hit the world without warning and left all of us with no time to prepare for the onslaught of the deadly virus. 

In a world where unprecedented occurrences are the new normal, business leaders are challenged more than ever to build a resilient ecosystem that is expected to not only survive against all odds, but thrive during times of crisis as well. Organizations, therefore, need to be well prepared by building adaptable and future-proof plans to manage operational, security, and risk hazards caused by such events. 

Leaders must execute at a striking pace to resolve all business and technology challenges emanating from uncertain times. Are leaders geared to tackle massive supply chain disruptions that have unfolded as a result of COVID-19?

Now is the time for an organization’s leadership to uplift the sinking economy by safely bringing employees back to work and reducing significant damage to their businesses. How should we plan to accelerate our collective recovery? And how do we prepare for what happens next? These are likely a few questions that are keeping decision-makers awake at night. This unimaginable time has unveiled the following observations —

The global political and economic environment has changed and will never be the same.

Shortages of critical supplies and components illustrated that our global economy, where supply chains are far-flung, is vulnerable. Vital resources and capabilities reside in regions where “unpredictability” is a significant factor. As regions compete for growth and economic development, they move through different phases of maturity. 

Regions gain skills and capabilities while underlying cost structures change. Political structures are fluid as alliances shift in response to pressures in many forms. Logistic priorities change as demands for various goods shift from region to region. These things have stood true since the beginning of time, but the pandemic showed us just how quickly things could change and get out of control with alarming consequences of failure.

Disrupted supply chains won’t turn back on suddenly — they will resume, but only at an uneven pace.

Global supply chains are complex. They are made up of individuals who eventually come together to form communities, cities, countries, and regions. These supply chains are held together by agreements between companies, treaties between countries, and the economic tensions created by groups acting in their self-interest. All of these companies and countries operate under different circumstances that provide advantages and disadvantages. It takes time for this ecosystem to reach equilibrium. One could argue that it never really does reach true equilibrium.

When this equilibrium has been destroyed or significantly disrupted, it doesn’t just snap back into place. As an aftereffect, the existing relationship may have suffered, new relations considered, and gaps may be identified that need to be mended. As disruptions move through the world, and additional supply chain stress emerges, the return to equilibrium will be hindered. Those businesses that come out on the other side will need a new capability to flex and respond to this changed environment or suffer peril.

“Most industries will need to reactivate their entire supply chain, even as the differential scale and timing of the impact of coronavirus mean the global supply chains face disruption in multiple geographies .... Leaders must, therefore, reassess their entire business system and plan for contingent actions in order to return their business to effective production at pace and at scale.” 1

Things that were true before now require thoughtful reconsideration.

Over-dependence on a single supplier creates substantial risk exposure compared to a diversified sourcing portfolio. The supplier may not be able to produce the component in the desired quantity, and this will decelerate your time to market. Single points of failure are now more dangerous than ever. Depending on a single region to source materials greatly increases the risk of supply chain disruptions.

Companies may start to hedge their bets and have alternate suppliers in different regions or source more of their raw materials and sub-assemblies needs locally. Building redundancies into the diversified supplier base absorbs the risk of supply chain shocks and enables a quicker rebound. 

Fundamental assumptions for resource planning that could be relied on in the past must be rethought. Once solid relationships and the resulting “stability” from such relationships are a thing of the past. 

To survive and thrive in this “new world order,” companies must be aggressive and adaptive, and need to respond proactively compared to one’s competition.

Supply and demand dynamics for products have been severely altered forever. A “plan B” must be accessible in hours or days. Being aggressive and responding fast matters the most if you want to retain loyal customers. 

With things attaining normalcy, it is highly probable that your customers will soon start demanding and expecting you to deliver products. Your competitor could easily capture market share if you don’t move quickly enough. 

We are sure you must be encountering many scenarios and coming across difficult questions in the wake of this pandemic. How should you focus to build organizational resiliency and ensure business continuity? The answer lies in responding faster to your customers’ needs by innovating at each and every step of the way.

“What people respect about the companies is not how they are structured or their specific approaches to management, but their capabilities—an ability to innovate, for example, or to respond to changing customer needs. Such organizational capabilities, as we call them, are key intangible assets. You can’t see or touch them, yet they can make all the difference in the world when it comes to market value.” 2

Get in touch with Bill Aston, EVP of Sales at Propel, to discuss how you can build an ecosystem of trust and empathy with your customers along with being well prepared to respond to improbable and chaotic black swan events such as a pandemic. Email him at bill.aston@propelplm.com. Contact him on LinkedIn.


Quote sources:

1. Beyond coronavirus: The path to the next normal, McKinsey & Company; https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/beyond-coronavirus-the-path-to-the-next-normal

2. Capitalizing on capabilities, Harvard Business Review; https://hbr.org/2004/06/capitalizing-on-capabilities

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