Imagine a calm lake. Now, throw a virtual stone and watch the ripple effect as it cascades in circles, wider and wider.
That’s how the #CoronaCrisis is disrupting the global supply chain.
According to Dun & Bradstreet, 938 of the Fortune 1000 companies have one or more tier-1 and tier-2 suppliers located in regions in China affected by the crisis. And it’s not just blue-chip companies that are feeling the impact. In a survey by the National Federation of Independent Business, 42% of small-medium business owners said that sales had slowed and 39% reported supply chain disruptions.
Forecasts vary, but the new reality is clear: Companies must have the capacity to respond quickly to gaps in the supply chain so they can continue to deliver goods and services no matter what this crisis throws their way. One of the ways to do this is by sourcing alternative vendors and solutions to fill those gaps and prevent broken links in the supply chain. In addition to some tips on how to do so, we’ve also included a list of manufacturing resources for your convenience.
Turn to Nearshoring
The coronavirus outbreak has highlighted the heavy reliance of the global supply chain on manufacturing abroad. This has compelled many companies to look to nearshoring to plug the supply chain gaps created by manufacturers located in the epicenter of the crisis.
Nearshoring is outsourcing to manufacturers based closer to home. This increases the stability of the supply chain, as it reduces the distance between the company and its suppliers. Although more costly than foreign production, nearshoring is a smart long-term strategy that can be a supply chain lifesaver during a crisis.
Research and Network
A good place to research manufacturing resources is online. A regular Google search will yield plenty of results to explore. There are also directories and associations with thousands of manufacturer recommendations sorted by categories, such as ThomasNet and MFG. Another way is to get referrals or word-of-mouth recommendations from within your network. In addition, consider researching competitors’ vendors as you build your list.
Assess Risk and Locate Alternatives for the Entire Supply Chain
It’s easy to get distracted by the biggest supply chain gaps. However, it is important to assess the current and future efficacy of every link of the supply chain. While one part of the supply chain might still seem healthy, this could change as the situation develops. Make sure to have alternate vendors in place for every possible gap that may arise.
What to Look For in Alternative Suppliers
Once the decision to source alternate suppliers has been made, it’s time to create a shortlist of potential candidates. These are the key qualities to look for when selecting new suppliers in advance of an expected supply chain gap:
Reliability: Make sure the vendor has the necessary infrastructure and operational capacity to maintain a reliable supply. This may be the most important factor, as it’ll help to avoid similar disruptions to the supply chain that occurred with previous suppliers.
Stability: Check the financial situation and stability of the supplier. This is vital to ensure the supplier has the capacity to provide the goods needed at the right time. It’ll also indicate the likelihood of the vendor being forced to shut down as a result of the COVID-19 event.
Cost efficiency: During a crisis, cutting supply chain costs may not be a realistic goal. If the vendor is situated locally, it’s likely that the costs will be higher than a vendor located abroad. However, the gain in reliability and stability is a valuable trade-off. Cost efficiency is about balancing the issue of pricing with the other benefits gained from the alternate supplier.
Good communication: Any worthwhile vendor must behave like a true partner, maintaining open, clear communication at every stage. This is crucial to assuring the flexibility necessary for a smooth, functioning supply chain, especially during a crisis period when the supply chain is more vulnerable to disruptions.