In 2020, the world experienced a shutdown, with COVID-19 causing a widespread supply chain disruptions through factory shutdowns, transportation challenges, labour shortages, demand shocks, and various other factors. The pandemic exposed vulnerabilities in global supply chains and has prompted businesses to rethink and strengthen their supply chain strategies.
As the virus first spread in China, the country implemented strict lockdown measures. This led to the temporary closure of many factories, disrupting the supply of raw materials, components, and finished goods. Since China is a major global manufacturing hub, the impact was felt worldwide.
The supply chain is the interconnected journey that raw materials, components, and goods take before their assembly and sale to customers.
Take automobiles, for example. Before a consumer buys a car, iron ore is extracted from the earth. The ore is transported to a plant, where it’s turned into steel, which is made into the chassis of the automobile. To make the car, various components from engines to batteries, electrical components, rubber tires, a metal body, and paint are assembled. Once the car is made, it’s sold in a retail setting to the end consumer.
When any link in a supply chain isn’t working optimally, you might say the supply chain has been disrupted. Different issues can emerge. For example, an increase in inbound material costs because one material costs more this year than it did last year can have major implications on a company’s cost structure.
A resilient supply chain is about businesses maintaining robust production capacity that can accommodate shifts in demand and remain stable amid disruption, without letting quality slide.
To build a resilient supply chain, businesses should focus on three fundamental aspects: Processes, People, and Technology.
Processes
Efficient processes ensure the smooth flow of materials, information, and resources throughout the supply chain. Companies need to update their supply chain strategies, moving away from outdated practices that focus solely on cost reduction, inventory minimization, and asset utilization. Instead, the emphasis should be on protecting supply chains from disruptions and enhancing flexibility.
Key Process Components:
- Forecasting:
- Achieve supply chain visibility by breaking down barriers and fostering transparency among suppliers.
- Build trust and promote collaboration among stakeholders to improve end-to-end visibility and resilience.
- Inventory Management:
- Optimize inventory strategies to enhance order flexibility and service levels.
- Focus on managing lead times, inventory positioning, safety stock, and localized replenishment models to ensure timely delivery and handle unexpected demands.
- Supplier Relationship Management and Sourcing:
- Develop a sourcing strategy that considers supply chain risks, not just costs.
- Select suppliers carefully and avoid relying on a single source when possible.
- Expand your supply network to mitigate supply chain risks.
- Commodity Management:
- Identify critical commodities to ensure a steady supply and prevent disruptions.
- Build a strategy around cost leadership despite challenges like inflation and shortages.
- Invest in commodity management to secure the right components at the right time and price.
People
Talent acquisition is essential for preventing future supply chain disruptions. Companies should seek skilled workers, such as engineers and procurement specialists, who can navigate challenges and adapt to market trends. The right people help businesses thrive in a fast-paced manufacturing environment.
Organizational Structure:
- Establish a commodity management team and a supplier relationship team.
- Commodity managers should be experts in their specific markets, focusing on short-term goals and staying aware of market activities, such as new products and pricing changes. This helps mitigate cost increases and component shortages.
Technology
Technology plays a crucial role in enhancing supply chain resilience. By leveraging real-time analytics and decision-support tools, organizations can gain valuable insights into spending, suppliers, and commodities.
Technological Tools:
- Use real-time analytics to gather baseline data for spend, supplier, and commodity analyses.
- Enriched data sets enable managers to make informed decisions about customer needs, production schedules, and logistics.
- Swiftly respond to market shifts with the help of advanced technology tools.
By focusing on these three key areas—processes, people, and technology—businesses can build a more resilient supply chain capable of withstanding disruptions and maintaining continuous operations.
Manufacturers require a stable and secure environment to ensure that the production to distribution link remains uninterrupted. Both the private sector and government have essential roles in this.
Government’s Role: The government can support manufacturers by providing production subsidies and ensuring reliable infrastructure. These measures can help producers reduce operational costs significantly.
Private Sector’s Role: The private sector can contribute by developing more economic hubs. For instance, the Enyimba Economic City (EEC) project is progressing through various development stages. Efforts are ongoing to secure investments, complete infrastructure, and attract businesses.
Long-term Vision: The goal is to establish the EEC as a premier economic hub in Africa, which will significantly boost Nigeria’s GDP and enhance regional economic stability.
Features of EEC:
- A 9,464-hectare free trade zone.
- Reduced tax incentives.
- Over 90 megawatts of power to ensure consistent energy supply for production.
- Provision of essential utilities such as water, gas, and broadband.
- Connectivity through road and sea, with no import and export duties.
For more information on the Enyimba Economic City project, click here
A resilient supply chain process is one that can withstand disruptions. Given the increasing frequency of natural disasters, geopolitical tensions, and global pandemics, companies must be prepared for unexpected events that could disrupt their supply chains. As such they must align with change, technology, and solutions that will not mare the processes that leads to production and in turn wealth creation.