Supply chain blind spots: where they occur and how to manage them
The most critical “currency” of manufacturers remains resolved: trust and reliability. And much of the responsibility for maintaining these qualities lies with the supply chain.
Global supply chains frequently face blind spots, such as the inability to anticipate business disruptions and supplier risk. This results in significant challenges for manufacturers and their customers, which neither can afford.
For example, the current global semiconductor shortage affects automakers, smartphone makers, and several other industries. Modern supply chains are built on low cost and efficiency, based on the “just-in-time” delivery of parts and finished products. But when the pandemic caused an increase in demand for electronic components, traditional delivery models failed to adapt. The time required to manufacture semiconductors and the complexity of the supply chain meant that suppliers could not meet demand quickly enough.
The first way to avoid blind spots in the supply chain is to invest in visibility. You won’t be able to mitigate all the disruption you encounter, but if you can identify the risk in advance, you can take action much sooner.
Gaining visibility is essential in helping businesses anticipate risks in real time, whether it’s understanding a weather event or a cybersecurity threat. Digitization is needed to keep supply chains up to date and access real-time dashboards. In addition, it brings together stakeholders to work towards the common goal of sharing information, inside and outside the organization. The stronger the collaboration and visibility between companies in a supply chain, the faster and more efficiently they can respond to disruptions.
Visibility can be seen through three main lenses:
- Consumer needs. Identify the most critical components and their associated risks. For example, are there seasonal shortages of essential parts or potential price fluctuations that affect operations?
- Pulse monitoring of suppliers and partners. Rigorously assess supply chain partners and their capabilities. What is the financial stability of your partners? Are there emerging risks to quality and shipping times?
- Potential market disruption. Be aware of political, environmental and other external threats. In recent years, tariffs have disrupted world trade. How does this affect the supply of components?
While risk identification is essential, the reality is that some events are unpredictable. Take the recent blockade of the Suez Canal. There was no way to know in advance that Ever Given would end up shutting down a good chunk of global supply chains for weeks. Flexibility and agility are essential to deal with such a blind spot in the supply chain.
Supply chain flexibility is primarily a by-product of preparation. Leading organizations create enterprise-wide global resilience teams responsible for diffusing risk in the event of severe threats and large-scale disruptions. This team prioritizes protecting an organization’s assets and those of its customers and partners, including human resources and intellectual property.
Companies can also set up strategic supply chain teams for specific product lines that oversee related operations. As the first line of defense when issues arise, they must constantly assess risk and work closely with planning, purchasing and other groups to optimize operational changes and specific decisions to meet product and customer needs. .
Over time, supply chains have become more centralized, a trend that creates more blind spots for the industry. Some materials have become regionalized, such as manufacturing plants, PCBs, and semiconductors, which are heavily dependent on China. This approach aligns with just-in-time models, where leveraging scale and reach results in efficiencies and lower costs.
However, since such a model results in fewer manufacturers and greater geographic concentration, the resulting risks are much higher. Consider the 2011 floods in Thailand that shut down 14,000 factories and rocked the hard drive supply chain. Industry giants Western Digital and Seagate had a high concentration of supply chain factories in flooded areas – nearly 60% of its drives were produced in Thailand – resulting in massive disruption.
With decentralized sourcing, such an event may have less impact on the entire supply chain.
A big part of improving visibility in the supply chain involves building strong relationships inside and outside the organization. Gaining transparency with suppliers can help manufacturers quickly identify blind spots, avoid bottlenecks, and stay informed of capabilities. In cases where disruption could not have been foreseen, strong relationships pay additional dividends in the form of shorter replenishment cycles for critical parts subject to sudden shortages.
Supply chains will never be completely free from blind spots. The key to tackling it is to build more resilient supply chains through strong visibility, relationships, tools and strategies. Now is the time to think about potential blind spots and measures that can be integrated throughout the supply chain, from sourcing to last mile delivery, to thwart potential disruptions. Successful manufacturers maintain confidence and reliability by staying ahead of potential blind spots and ensuring that supply chains are resilient no matter the challenge.
Lynn Torrel is responsible for supply chain and purchasing at Flex.