A news report (https://tinyurl.com/y55ypho3) described six ways that supply chains can build in resilience to deal with the pandemic during the early days when suppliers in China were impacted. These include adjusting shipment modes, using alternate designs, building up inventory, leveraging existing supplier capabilities etc. How quickly can each of these alternatives be leveraged to build in resilience ? Do these suggestions imply dual sourcing ? Will costs increase as a result ?
Global Supply Chain Musings 
During the pandemic, to satisfy high demand, those alternatives way will be leveraged to build resilience as fast as companies can. These suggestions aren’t just dual sourcing but the cost do will increase. Switch mode from by sea to by air will increase the shipping fee. Change designs and build a buffer will increase the material cost, labor fee, and so on. Prioritize products maybe will lose profit. Leverage existing suppliers and Explore new sources, those both will increase the manufacturing cost by bidding with other companies or exploring new resources.
Post by Jason LaFord,
Out of the six ways companies can build resiliency some of the options would be much quicker to switch to than others. To build some resilience quickly during these difficult times companies should be focusing on prioritizing products, switching modes, and leveraging existing suppliers. A company should have analysis of what its best selling products are, so focusing on only their top selling products could be done the quickest. Sometimes switching modes for a company could take a very long period of time, but with many companies having an ecommerce platform available it wouldn’t be as difficult to switch modes. With COVID causing stores to close their doors, this allowed for their ecommerce platforms to expand in use. Since suppliers would like manufacturers to continue to produce, they would be willing to help out the manufactures to keep the supply chain from being backed up. Reaching out to existing suppliers will help out companies that are experiencing shortages of a product quicker than having to potentially wait longer for the same product from your supplier that you currently have a contract with. I believe that this source does imply that dual-sourcing should be utilized by a company. If one supplier does not have the product that you need at this moment, and it would be cheaper to outsource the product from another supplier then it would make sense to use both suppliers. Using this approach limits the amount of waiting time throughout the entire supply chain. As a result of having to switch methods, building a buffer or changing the design of the product, this will cause the end price that the customer pays to be more. The new cost that is included with the price that the customer pays will include any new parts that are needed for the product, the cost of the new shipment method, and any other cost that is incurred by the manufacturer.
The six alternatives are aimed at building resilience during the pandemic. Among the six alternatives prioritizing products and leverage existing suppliers would be some more favorable solutions for companies. Switching modes to air transport could boost efficiency, especially efficiency has become the primary goal of many companies. However, air transportation would significantly increase the shipping cost, leading to a rise in the price of final products. Changing designs would be a very risky approach due to the inconsistent material quality of different sources, which may potentially harm the reputation of companies. Buffer inventory will generate a high cost for holding the inventory. Prioritizing products requires the ability to recognize the most popular products and rank the products from most needed to the lower-volume, but it could effectively alleviate the shortage of some popular products. Leveraging existing suppliers is another alternative for companies to quickly build resilience since suppliers are happy to provide help to manufacturers to overcome such a difficult time, it would save the company a lot of time to maintain sufficient supply. Exploring new sources may lead to higher prices of products caused by bidding, but if we could ensure the quality of other suppliers, companies would not have to waste time on a single supplier. These suggestions imply that there is not a perfect solution, but if we can ensure the quality of materials, dual sourcing is definitely an efficient approach for companies during the pandemic.
These alternatives will take different amounts of time. The company should update their short-, medium- and long-term strategy constantly to have more resilience during pandemic. For short-term, they can switch modes to satisfy the demand and leverage the current suppliers to have the manufacturing flowing. For medium-term, they can increase their buffer when the pandemic is getting worse. Changing designs might take time but is necessary if it is beneficial for flexibility. For long-term, they might need to reevaluate their product line to satisfy the change of customers’ habits and needs. If the company suffered extensively due to offshoring, they might reconsider reshoring to prepare for the future. This can also be considered as dual sourcing as the current suppliers are the results of lean manufacturing and the new sources can be supplemental to add resilience. There is always compromises between efficiency and resilience thus it will increase the cost. It is up to the companies to find their sweet spot.
After reading the 6 potential methods by which a company or manufacturer can build resilience in their supply chain, it seems fairly trivial. So why were so many companies and supply chains caught unprepared for such an event? The first method which highlights the mode of transportation could be an issue in certain regions of the world, for example a factory in China may have access to established naval routes and road infrastructure, but one of the materials they use to produce their goods may be made in a developing country who does not have adequate transportation infrastructure. As a result, even if the factory in China was able to increase demand, there would be a shortage of required material creating a bottleneck and increasing lead time. The other method by which companies or businesses can build resilience is to stockpile or create larger reserves in the event of a supply chain break. The problem with this is that storing so much inventory is costly, and the only foreseeable use for this inventory is a unique situation such as this. As mentioned in lecture, many companies have in fact begun to move away from holding large inventories to drive down cost of storage.
bmyczkow – This is Professor Iyer’s assistant. I do not recognize your username. Please send me an email (gablej@purdue.edu) a.s.a.p. with your name in order to receive participation credits. please put in subject line MGMT 561 username
When considering the alternatives outlined in the article, I think they all vary in terms of quickness to implement and cost. For example, switching shipping modes from sea to air would be relatively easy, but much more expensive for a company to implement and keep running. In this situation, it would be important to evaluate if the company would lose more money as a result of lost sales, or from paying too much in shipping costs before implementing it. As another example, exploring new sources could add great resiliency to a company’s supply chain, but requires a great time investment to set up. Exploring new sources would be a better option for companies to implement to better prepare themselves if a situation like this were to happen again. I think it is important to note that building resiliency in your supply chain does not typically lead to reduced costs and that trying to run super cost-efficient supply chains is what made it difficult for businesses to meet demand during the pandemic.
The six alternatives will affect differently defends on different types of companies.
Switch modes: the costs and the transportation status
Change designs: this should be better applied in long-term consideration
Build a buffer: Mostly, the high-volume products will be scheduled a buffer inventory while the low-volume products will not.
Prioritize products: Will sort out fast sales and slow sales which affects the booking and billings.
Leverage existing suppliers: to keep the existing relationship and better support to customer, they usually will cooperate and even make some concessions during the specific time.
Explore new sources: This should be the backup plan while the last choice among these six, since it really takes time to develop new business and build up the channel and trust.
switch modes from sea to air and build a suffer will increase the costs.
explore new sources will be dual sourcing.
For immediate recovery, companies can focus on alternatives that suggest change in mode of transport, alternative components and lowering product diversity. For instance, we can see that large stores are not stocking up on different variants of the same products, as the companies are using all the capacity to focus on products that are high volume in production and low in customization. Changing mode of transport will help reducing the backlog but increase the cost for customers.Moreover, the shipping industry has taken a huge hit and it will take some time to clear up the in-transit inventory. There is a backlog at the ports, which has increased the queue for unloading thus increasing the number of in-transit ships, in turn creating backlog at the source. Companies will need time to get back to BAU, while they can transfer their costs comfortably to the customers because this problem is being faced by everyone in the industry. However, this pandemic will leave us with lessons of onshoring, dual sourcing and building supplier relationships. Companies have realized that cheap production is not the only criteria they should be having while making sourcing decisions. One way they are approaching this is through reshoring, vertical integration and helping the domestic supplier base in building capabilities so they can match volume and quality as existing suppliers. As far as cost is concerned, the long term benefits could lead to lower costs as well, as these steps will increase competition among suppliers, reduce transportation, disruption and import costs. The investment in building supplier relationships and capabilities can be considered as a capital expenditure with a certain payback period.
I think these six strategies are very enlightening, especially in the face of a pandemic. Based on the different characteristics of these six strategies, they can be roughly divided into two categories, those that can be implemented in a short period of time and those that require advance preparation. Switch modes, Change designs, Prioritize products, and Leverage existing suppliers are relatively possible to implement and achieve results in a short period of time. The main feature of these strategies is to optimize and make full use of existing resources, and to improve the current situation without increasing excessive additional costs. At the same time, the above several strategies also mainly focus on the internal aspects of the enterprise and will not be restricted by the epidemic to a large extent. On the other hand, Build a buffer and Explore new sources require relatively large preliminary preparation and investment, which may involve additional fund investment.
The options that require the least amount of time are those that require the least coordination between multiple parties. Building a buffer and prioritizing products are both strategies companies can relatively quickly employ to protect themselves against supply chain disruption. Several of the options involve building in redundancy or back-ups, which does require establishing relationships with multiple suppliers. As such, this does imply dual sourcing, or at the very least being prepared to practice dual sourcing.
Efforts to build a resilient supply chain do increase cost. However, the risk of an overly-lean supply chain is that companies may incur high shortage/opportunity costs if they face product shortages. Therefore, a decrease in product shortages can make up for an increase in supply chain costs.
Adam, when reading the article I was thinking many of the same things and I don’t want to post redundantly for the sake of participation points. The two ways you mentioned (buffer and prioritizing) involve fewer entities and could seemingly be employed relatively quickly. You note that some of the other options require establishing additional relationships, but I also considered the current contractual obligations a business may have with current suppliers/transport services. I have never worked in this world and know very little about it, but I am sure it isn’t a speedy or cheap process to alter current agreements. Does anyone have any insight on this?
Since many of my classmates have covered most of the discussion points very well, I will focus on a couple interest points in Adam and Vincent’s post. Here are my comments:
Building a buffer vs alternative sourcing
Adam made a very appropriate comment that the quickest move is the one with the least coordination required. However, I would not completely disregard the search for alternative sourcing as a quick course of action. Usually, many companies have a list of pre-approved suppliers for some materials (or commodities) which can speed up the process for getting inventory elsewhere. Moreover, the company can leverage the existing supplier base – that is, supplier for other materials – to reduce the response time.
Contractual obligations
While I do not have first-hand experience on the legal / contractual side of procurement, I would think it is pretty rare for a company to contractually commit to one supplier (rare, not impossible). Also, the inability of the supplier to provide the needed inventory would violate the Service Level Agreement between both parties. As per transportation services, while companies may not be contractually obliged to one provider (transportation is virtually a commodity), the cost may be too high to bear with (27% increase in air cargo rates in March 2020 – see source below).
Air cargo rate link:
https://www.freightwaves.com/news/air-cargo-rates-spike-amidst-covid-19-pandemic
I think these six strategies are very enlightening, especially in the face of a pandemic. Based on the different characteristics of these six strategies, they can be roughly divided into two categories, those that can be implemented in a short period of time and those that require advance preparation. Switch modes, Change designs, Prioritize products, and Leverage existing suppliers are relatively possible to implement and achieve results in a short period of time. The main feature of these strategies is to optimize and make full use of existing resources, and to improve the current situation without increasing excessive additional costs. At the same time, the above several strategies also mainly focus on the internal aspects of the enterprise and will not be restricted by the epidemic to a large extent. On the other hand, Build a buffer and Explore new sources require relatively large preliminary preparation and investment, which may involve additional fund investment.
There are always going to be trade-offs in such situations. De-risking or building resilience will always lead to an increase in cost when compared to ideal conditions. More and more companies are turning towards localization/dual sourcing not only as a means to increase resilience but also to build lasting relationship with suppliers and in turn exploit their capabilities. The market paradigm is quickly shifting from ‘who can provide the cheapest product’ to ‘who can provide a product consistently with same quality level’. Adjusting shipment mode would mean getting a product quicker to build inventory. The increased inventory holding cost and shipment cost would make the product costlier during these hard times (unless a company wants to incur losses). If a product is completely outsourced, changing designs would require a strong relationship with the supplier to be able to execute this plan successfully, and unless that supplier is undaunted by the crisis while being offshore, it would be equivalent to hitting a self-destruct button. Hence, localization along with building lasting relationship with suppliers would in some way ameliorate the effects of a crisis such as COVID-19.
Those six actions will provide resilience but after 6 months of the pandemic we can clearly see some alternatives worked better than others in this pandemic. Let me use face mask, a critical but short-supplied product as example.
1. Switching modes worked for emergency goods – especially those that are smaller like gloves and face masks. However, this will increase the cost significant, and this is not applicable to the whole supply chain because the capacity of sea traffic would not be substituted with the relatively smaller capacity of air traffic.
2. Change designs again worked in several industry but not all industries. For face masks it’s easy to switch from one fabric to another but it’s hard to than prove the other fabric has same functionality and safety of the first one – and it will be even harder to educate the buyer on this point. But for clothing it would be a different story – imported polyester might just work as good as domestic produced cotton fabric. Cost would also increase as new material most times means new supplier, smaller order amount, more testing and weaker bargaining power.
3. Build a buffer DID NOT work in this pandemic. The inventory company kept as buffer was only for Chinese New Year and if the pandemic goes any longer than the 14 days holiday period – as we now see in a lot of other countries the buffer will be depleted and keeping a daily buffer of such a large inventory for a pandemic that happens once in a decade would not be a wise idea. Take face masks as example – China drained the inventory of face masks of the whole world in first month of pandemic and shortage was covered only after more producing capacity was released by adding more equipment.
4. Prioritizing products worked great. A lot of companies, even car manufactories switching to face mask production during the pandemic and they did earn a fortune through this move. The cost is, however, still huge because new equipment, work space and labor were needed for the increased capacity and once the increased demand fades away, they have to figure out a way to deal with the excessive capacity.
5. Leveraging existing suppliers or exploring new sources are great strategies as the investment for increased productivity was most like transferred to upper stream of the supply chain and cost structure would be much clearer to buyer. The question is again, during a global pandemic would such supplier or source be available and accessible, and how reliable they would be.
In conclusion, when facing a pandemic, the supply chain would need extra cost to maintain the production of goods. Most, if not all the six suggestions do not have dual supplier directly in them but keeping secondary supplier as back up would be a wise idea in preparing huge disruption to supply chain.
Those six actions will provide resilience but after 6 months of the pandemic, we can clearly see some alternatives worked better than others in this pandemic. Let me use a face mask, a critical but short-supplied product as an example.
1. Switching modes worked for emergency goods – especially those that are smaller like gloves and face masks. However, this will increase the cost significantly, and this is not applicable to the whole supply chain because the capacity of sea traffic would not be substituted with the relatively smaller capacity of air traffic.
2. Change designs again worked in several industries but not all industries. For face masks, it’s easy to switch from one fabric to another but it’s hard to then prove the other fabric has the same functionality and safety of the first one – and it will be even harder to educate the buyer on this point. But for clothing it would be a different story – imported polyester might just work as good as domestic produced cotton fabric. The cost would also increase as new material most times means new supplier, smaller order amount, more testing, and weaker bargaining power.
3. Build a buffer DID NOT work in this pandemic. The inventory company kept as a buffer was only for Chinese New Year and if the pandemic goes any longer than the 14 days holiday period – as we now see in a lot of other countries the buffer will be depleted and keeping a daily buffer of such a large inventory for a pandemic that happens once in a decade would not be a wise idea. Take face masks as an example – China drained the inventory of face masks of the whole world in the first month of pandemic and shortage was covered only after more producing capacity was released by adding more equipment.
4. Prioritizing products worked great. A lot of companies, even car manufactories switching to face mask production during the pandemic and they did earn a fortune through this move. The cost is, however, still huge because new equipment, workspace and labor were needed for the increased capacity and once the increased demand fades away, they have to figure out a way to deal with the excess capacity.
5. Leveraging existing suppliers or exploring new sources are great strategies as the investment for increased productivity was most like transferred to the upper stream of the supply chain and cost structure would be much clearer to the buyer. The question is again, during a global pandemic would such supplier or source be available and accessible, and how reliable they would be.
In conclusion, when facing a pandemic, the supply chain would need extra cost to maintain the production of goods. Most, if not all the six suggestions do not have dual suppliers directly in them but keeping secondary suppliers as back up would be a wise idea in preparing huge disruption to the supply chain.
During the pandemic, these six ways can be leveraged to build resilience for companies. But the time that companies need to be resilience through these ways will depend on different industries and rational utilization of the choices. The uncertainty of the situation will increase the costs in different extent. The companies need to consider trade-off between the lead time and cost when they switch mode even air freight is much faster. Comparing sea freight and air freight, these two ways limited by the property of the product such as the product with time-sensitive and high-tech, the raw material with large volume and weight. Also, the companies need to be aware of the situation earlier and plan ahead to change designs, explore new sources and build a buffer so that they can enhance their flexibility quickly. However, if they missed the best time, they may take risks from increasing material price and uncertain global logistics. I think prioritize products and leverage existing suppliers have lower risks to remain supply chain resilience quickly during the outbreak. From these six ways, the majority aim is to increase capacity, shorten lead time and satisfy market from different regions. The benefits of dual sourcing can make the aim come true.
The upheavals in the business operations around the globe have surfaced the lack of resilience in their supply chain infrastructure. The extent of success in the implementation of these six alternatives will greatly depend on the robustness of the company’s existing supply chain design. For increasing efficiency, when companies adopt philosophies like lean operations and JIT that emphasize concepts like holding minimal inventory, they should, at the same time, also focus on minimizing disruptions and building resilience by maintaining buffer inventory. So, companies need to find that optimum point for inventory levels and most importantly, realize that contrary to the common belief, resilience and efficiency are meant to complement each other to truly derive profitable results at all times, even in uncertain times like the one we are facing now.
Decisions pertaining to switching modes and building buffers are to be solely made by the company and they dominantly just require capital, without much bureaucratic lock jam. Therefore, these alternatives can provide immediate but short term solutions. Changing design and prioritizing products might not provide immediate results, as it requires analysis of multiple parameters and forecasting. Leveraging existing suppliers and exploring new sources will require the involvement of various parties and corporate red tapes could lead to delays. So, these alternatives might not provide immediate results though they will build resilient structures in the long term.
Every alternative has an associated cost and the perception of this cost might vary. It should be seen as the cost of competitive advantage in these times. The investment made in these alternatives will eventually yield a sturdy, yet a profitable foundation for the supply chain.
For pandemic situations like COVID -19, all the six alternatives are important but can vary or could be classified in to different categories of severity and need for implementation. E.g. for products like toilet paper – switching to a few SKUs would push the production and focus on the need for fulfilling the demand rather than creating new customers by marketing more features. Alternatively opting for dual sourcing can help retailers to fulfill the sudden spike in the demand too. A quick movement which though will add the cost would now be a better choice for manufactures as well as retailers. These costs would ultimately be passed upon customers which in longer run can discourage the usage or look for some alternatives. One of the most important lessons which manufacturers have learned is about the importance of safety stock and how lean manufacturing can sometimes pose challenges in situations like COVID -19. Now having in hand inventory is not seen only as a cost but as better planning. Developing alternate suppliers has equally become important. Too much reliance on one particular country has been posing a huge challenge. China could be a good example, US outsourcing of goods to vendors and suppliers to a particular country, relations have been marred with situations like a pandemic, US-China trade wars, etc. Developing a more global dual sourcing strategy could be a tedious or money intensive task but could be of great benefit in situations like COVID -19
COVID-19 has already exposed the vulnerabilities of many organizations, especially those who have a high dependence on China to fulfill their need for raw materials or finished products. Out of the six alternatives mentioned in the article, some of the options would be quicker to switch to than others. Also, leveraging such alternatives will incur costs to the companies and ultimately to the customers. Since there is already a backlog at shipping ports, switching to air mode seems a fair option for immediate recovery. This could also help in building a buffer more quickly to satisfy increase demands. As a result, both shipment cost and inventory holding cost would elevate. Changing design would also need a short span of time but for such flexibility, it demands strong relationship with supplier to ensure consistent quality raw material. Increase in cost here would be relatively low as compared to previous two options. Companies already know what their best selling and low selling products are, so manufacturing more of the high selling products would increase the profits. The costs might increase if the prioritized products are costly to manufacture. Leveraging existing suppliers is another immediate option during supply chain disruptions. This would also make supplier-manufacturer relationship stronger. Businesses need to eliminate their dependence on single supplier. For example,Tsunami of 2011 in Japan crippled the automotive industry because major spare parts were supposed to be sourced from Japan. Multi-sourcing seems the most effective alternative when it comes to supply chain resilience. Adding near sourcing to it could help build a safety net and ensure business continuity in such hard times. . Multi-sourcing could also offer a cost benefit by introducing competition between suppliers to offer best price. However, this option would take maximum time out of all 6 alternatives to implement.
COVID-19 has already exposed the vulnerabilities of many organizations, especially those who have a high dependence on China to fulfil their need for raw materials or finished products. Out of the six alternatives mentioned in the article, some of the options would be quicker to switch to than others. Also, leveraging such alternatives will incur costs to the companies and ultimately to the customers. Since there is already a backlog at shipping ports, switching to air mode seems a fair option for immediate recovery. This could also help in building a buffer more quickly to satisfy increase demands. As a result, both shipment cost and inventory holding cost would elevate. Changing design would also need a short span of time but for such flexibility, it demands strong relationship with supplier to ensure consistent quality raw material. Increase in cost here would be relatively low as compared to previous two options. Companies already know what their best selling and low selling products are, so manufacturing more of the high selling products would increase the profits. The costs might increase if the prioritized products are costly to manufacture. Leveraging existing suppliers is another immediate option during supply chain disruptions. This would make supplier-manufacturer relationship stronger. Businesses need to eliminate their dependence on single supplier. Multi-sourcing seems the most effective alternative when it comes to supply chain resilience. Adding near sourcing to it could help build a safety net and ensure business continuity in such hard times. Tsunami of 2011 in Japan crippled the automotive industry because major spare parts were supposed to be sourced from Japan. Multi-sourcing could also introduce competition between suppliers to offer best price to manufacturer. However, this option would also take maximum time out of all 6 alternatives.
Both tactical and strategic steps can be taken to increase the resilience of the supply chain in a pandemic. Measures such as switching modes, design changes, building a buffer, prioritizing products, and leveraging existing suppliers would help address short-term safety stock accumulation goals, shorten lead times, and, meet customer needs with similar products. Such measures require additional resources from companies, suppliers, and, of course, from the end payer for these products. However, as we can see now, it took several months to establish the systemic work of the supply chain during a pandemic.
Moreover, companies need to take strategic action to address the root issue of supply disruption risks. For example, searching for alternative suppliers, or moving factories to other countries. Thus, dependence on one producer or one country will be reduced.
In addition, in my opinion, the full production cycle of specific goods, the availability of which may affect the security of the country and the population, should be produced locally. In this case, country as a whole can benefit from economies of scope. Consequently, there will be lower delivery times, transportation costs, and the risk that certain raw materials will be primarily used for the needs of other countries. Capital investments will be colossal, although in case of uncertainty, all participants in the local market will benefit from this.
From my personal experience, the six alternatives are helpful to fulfill the customers’ needs. During pandemic period such as COVID-19, the supply chain met a problem in our china factory. All of the materials are in shortage and lead time is unstable and long. Therefore, it requires us to plan in the long run to ensure there will be enough stock. And we have to find alternative ways for the shipment to make the customer receive the shipment as soon as possible. The communication and coordination play a big role here as well.
From my personal experience, the six alternatives are indeed helpful during a pandemic period such as COVID-19. Our company supply chain met hardship due to the factory in China during the pandemic. All the materials were in shortage and the lead time as unstable. It required us to plan in the long rum to ensure there will be enough stocks for the customers. Additionally, finding alternative shipping way is a good option to deliver the goods to the customers on time. The communication and coordination played a big role here as well.
There are 2 main things that I feel are important to have a resilient supply chain: A company should weigh between uncertain future cost with certain current cost.
Certain current cost: Focus is extremely important for decision making during risk situation. A firm has to be decisive in picking between profit and growth. Unnecessary inventory cost could be saved and money could only be allocated for important products. A company can do ABC segmentation of product based on their business strategy. ABC analysis can be done based on profit generating categories and only those categories should be ordered to suppliers.
Uncertain future cost: Situations like pandemic might be once in a century but there are many risk situations for which resilience is important. Thus, long term strategy should always be in the supply chain strategy portfolio. Investing in long term can save unnecessary costs. For example: Supplier management is extremely important for resilient supply chain. A supplier base in China can’t be shut down in few months as China is too good when it comes to production. Thus a long term strategy can be developed to reduce the reliability on one country. For example: A firm in USA having sole supplier base in China can start setting up suppliers in India for big orders and for emergency orders of low quantity they can setup a base in Mexico. This can help in continued production reducing the probability of stockout.
Although all six ways have specific benefits under pandemic, different industries in different sizes must suit these methods to their own situation. Here the 4C supply chain architecture is highly related.
-Chain structure: Exploring new sources implies dual sourcing, which increases nodes and linkages from the supply base. This would highly increase the cost but decrease the risk of shortage or even production halt. Especially during pandemic, ‘keep running’ and maintain a good reputation is important.
-Capacity: Building a buffer is a way to make sure enough capacity is in the right place. At the beginning of pandemic, necessities’ demand highly exceeded supply and people crowded to stockpile in a panic, and companies tried their best to produce more. However, now as pandemic becomes ‘steady’, companies need to weigh the benefits between cost (production, inventory, etc.) and revenue.
-Coordination: Leveraging existing suppliers is a way of reducing shortage risk, which can take advantage of existed reliable relationships and resources within a short time. If companies are able to monitor and promise quality as before, this seems to be the best choice for resilience.
-Competitiveness: The remaining three ways are used to stay competitive. Switching modes increase efficiency as well cost, whether final customers would like to pay for that cost need to be considered; Changing designs seem to be highly flexible, but would new products be accepted by the market?; Prioritizing products could be the easiest way among all choices, but companies also need to think about whether suppliers would be able to provide enough material under surging requirements.
The six ways business can remain resilience in this global pandemic shows how flexibility can provide alternatives to survival for businesses focused on a global supply chain. Before the pandemic, businesses invested heavily on lowering costs by consolidating production, transportation and management. With the impact of COVID-19, businesses are forced to seek alternative venues of supplies and transportation. Also, businesses are faced with significant fluctuation in demand and request on flexibility. With many businesses shut down due the black swan event, surviving would be more important than ever as there is a chance to greatly increase one’s market share after the new normality is established. One of the important methods a business can stay resilience is prioritizing its products. To analyze it from the four Cs of supply chain theory, to prioritize ones products is to focus on changing the structure of the supply chain. In order to allocate limited resources due the pandemic, the company should disengage in the production of less competitive products and resort to more profitable SKUs. By trimming the supply chain structure, the business will be able to gain a better chance of survival by stabilizing production and reducing costs.
During this pandemic, it’s extremely important for supply chain to keep flowing. For example, at the beginning of this pandemic in China, masks are in urgent need but the whole supply chain stopped because it’s Chinese New Year. Even if stores have some inventories, it’s still not enough for the whole country. In order to meet the demand, a lot of manufacturers, not only masks manufacturers but also manufacturers in other industries like clothing and even auto, are staring to make masks. There’s no doubt that it might cause a little difficulties at the beginning since they didn’t have the equipment and enough people. But their decision to ‘change design’ and prioritize products did respond to the demand quickly. And because of that, the supply chain builds resilience and this pandemic are under control in several months. They even have more stocks to help other countries afterwards, which, of course, are shipped by air instead of by sea.
So, we can tell from the real example that those alternatives do have their impact. Switching modes and prioritizing products can be used to build resilience quickly and other four alternatives are slower. And for manufacturers, it might be efficient for them to use dual sourcing because what they need is to keep the production line flowing, which doesn’t allow the shortage of supplies. If other suppliers can offer materials in the same quality, then they can be chosen. As for the cost, prioritizing products might lose profits and other five alternatives might increase the cost in shipping, purchasing equipment and materials and so on.
Flexibility is the key in supply chain industry for the pandemic time right now.
-Switch modes: change from sea to air is a solution. more inventories for each shipment is also helpful.
-Change design: not just the material. the company can also invest new efficient equipment in the factory.
-Build a buffer: the company can also build more distribution centers and get more buffer which close to the customers.
-Prioritize products: they can use A,B,C classification to prioritize the products.
The six ways that supply chains applied in resilience do deal with the pandemis are good suggestions, however, different approach would be applied in different situation to maximize benefit.
1. Switch modes: By switching from moving good by sea to by air, it would increase the speed of building in resilience definitely, however, it highly increased the cost. Therefore, i would recommend to moving emergency indeed goods by air, for example like emergency medical goods, and moving other necessary goods by sea. Cost would be reduced this way.
2. Change designs: This method applied dual sourcing. As mentioned, they would have more flexibility. The competing company would try to improve their products and lower the cost in order to be competitive. And thus, they would lower the cost.
3. Build a buffer: By the time when the corona-virus happens, companies have inventory in advance since workers were off for festival. The buffer inventory could be sold, and help with building resilience at the first time. However, it would be a problem when the company run out of buffer inventory. I would say this simulate the economy. As far as I know, all plants are back to producing soon, and they would have no worries since the products could be sold and the buffer needs to be replenished. This reduced the stock cost, and thus reduced cost.
4. Prioritize products: It is a good decision to produce fewer low-volume products and produce more popular products. Still producing low-volume products rather than stop producing offers more choices for customers, thus would satisfy demand, and thus increase revenue. Also, reduce low-volume products would reduce cost by lowing stock cost because popular products would be sold quickly.
5. Leverage existing suppliers: Existing suppliers are willing to help manufacturers, this would make the whole flow moving faster. This would of course increase the speed of building in resilience. And the cooperation between manufacturers and suppliers would enhance the friendship, and thus reduce costs.
6. Explore new sources: Having just one supplier is not a wise choice. As everyone knows, put all eggs in one basket increase the risk. Besides, the cost would be high since the supplier knows that they are the only one and there is no competition. However, By having other certified suppliers on list would reduce risk. The potential supplier would take over the place if any emergency happens to the original chosen supplier. Also, the chosen supplier would be the one who offers a relatively low price since many companies are chasing after them, and thus lower the cost.
The six ways that supply chains applied in resilience do deal with the pandemis are good suggestions, however, different approach would be applied in different situation to maximize benefit.
1. Switch modes: By switching from moving good by sea to by air, it would increase the speed of building in resilience definitely, however, it highly increased the cost. Therefore, i would recommend to moving emergency indeed goods by air, for example like emergency medical goods, and moving other necessary goods by sea. Cost would be reduced this way.
2. Change designs: This method applied dual sourcing. As mentioned, they would have more flexibility. The competing company would try to improve their products and lower the cost in order to be competitive. And thus, they would lower the cost.
3. Build a buffer: By the time when the corona-virus happens, companies have inventory in advance since workers were off for festival. The buffer inventory could be sold, and help with building resilience at the first time. However, it would be a problem when the company run out of buffer inventory. I would say this simulate the economy. As far as I know, all plants are back to producing soon, and they would have no worries since the products could be sold and the buffer needs to be replenished. This reduced the stock cost, and thus reduced cost.
4. Prioritize products: It is a good decision to produce fewer low-volume products and produce more popular products. Still producing low-volume products rather than stop producing offers more choices for customers, thus would satisfy demand, and thus increase revenue. Also, reduce low-volume products would reduce cost by lowing stock cost because popular products would be sold quickly.
5. Leverage existing suppliers: Existing suppliers are willing to help manufacturers, this would make the whole flow moving faster. This would of course increase the speed of building in resilience. And the cooperation between manufacturers and suppliers would enhance the friendship, and thus reduce costs.
6. Explore new sources: Having just one supplier is not a wise choice. As everyone knows, put all eggs in one basket increase the risk. Besides, the cost would be high since the supplier knows that they are the only one and there is no competition. However, By having other certified suppliers on list would reduce risk. The potential supplier would take over the place if any emergency happens to the original chosen supplier. Also, the chosen supplier would be the one who offers a relatively low price since many companies are chasing after them, and thus lower the cost.
These alternatives could build in resilience quickly except change design. To change design, the company need to spend a lot of time on test new material on the machine, production line trial operation, etc, and will take the risk of the new material is not suitable; Switch mode could build in resilience fast but not economically efficient, during the pandemic as passenger flights were canceled, the cost of sending cargo by air changed rapidly. The cost of sending cargo across the Pacific Ocean tripled by late March. The Company should only send essential cargo by air for better economic efficiency; Build a buffer could be leveraged by the company in a short time and only increase some cost because more inventory; Prioritize product is easy to imply but the company may meet the raw material shortage. leverage existing supplier is riskier than the other ways if the whole supply chain suffered a huge impact by pandemic, suppliers may not able to help. Explore new sources imply dual sourcing and reduce the risk of relying on a single supplier and dual sourcing could be helpful for company growth, more suppliers to keep up with increasing customer demand.
These alternatives could build in resilience quickly except change design. To change design, the company need to spend a lot of time on test new material on the machine, production line trial operation, etc, and will take the risk of the new material is not suitable; Switch mode could build in resilience fast but not economically efficient, during the pandemic as passenger flights were canceled, the cost of sending cargo by air changed rapidly. The cost of sending cargo across the Pacific Ocean tripled by late March. The Company should only send essential cargo by air for better economic efficiency; Build a buffer could be leveraged by the company in a short time and only increase some cost because more inventory; Prioritize product is easy to imply but the company may meet the raw material shortage. leverage existing supplier is riskier than the other ways if the whole supply chain suffered a huge impact by pandemic, suppliers may not able to help. Explore new sources imply dual sourcing and reduce the risk of relying on a single supplier and dual sourcing could be helpful for company growth, more suppliers to keep up with increasing customer demand.
Post by Zhewei Tao
Basd on the content from the article, we knew there are six ways that companies can use to build reseliency and it’s obvious that each option has it’s own advantages and disadvatages. And apparently there is no such absolutly correct answer or solution for all the companiye in once. Each company should develop and adapt its own and most suitble strategies to fit their business. Generally speaking, when a company decideds to swith its own goods shipping method, it will face huge increase on the shipping cost plus the uncertaintes from foreign customers’ regulations. Let’s use U.S and China tension as an example, in this case the speed of the shipping is not playing a major role anymore, the possibilitie of rejecting or accepting for customs is actually play a bigger role. If a company spent 80% more money on expensive air shipping but all the goods got rejected or stucked in customs’ warehouse for a long time. Then the extra 80% money doesn’t work well as it should be. So under this condition, each company should understand the risks and opportunity costs got involved in this decision making process and try to use the less risky one to at least keep the logistic flow. Piroritze products, change design, explore new sources and leverage existing suppliers should be relatively easier to conduct and more flexible than the rest of options. The reasons are that not much adjustments and initial investment need to be put to make the changes. A mature manufacturer has their production line set up already and should be ready to use any time if needed. The major cost gets involved is the switching time cost. It might take a while to switch current production line to specific one but this cost can almost be ignored when compares to opening a new producting line in most of the cases. And under current industry environment, raw material cost is no longer a mystery. All suppliers need to make their prices competitive to stay in the business, aslo they are all more willing to make small changes to meet manufactures’ needs to keep the relationships ongoing. So if company decideds to swith or adjust the raw materials, less efforts need to be made. As for builing a buffer, I can see there is a direct capital involvemnt. They first one is from the payments to workers, especially during the pandemic. It’s getting hard and expensive to hire the same amount people than usually do. Compaines might need to pay 3 to 5 times more to have this job done. Another one is the storage cost, it might not sounds it’s bad enough to impact the cash flow but since manufacturers are heavily relying on cash. This factor should not be neglected.
Post by Zhewei Tao
Basd on the content from the article, we knew there are six ways that companies can use to build reseliency and it’s obvious that each option has it’s own advantages and disadvatages. And apparently there is no such absolutly correct answer or solution for all the companiye in once. Each company should develop and adapt its own and most suitble strategies to fit their business. Generally speaking, when a company decideds to swith its own goods shipping method, it will face huge increase on the shipping cost plus the uncertaintes from foreign customers’ regulations. Let’s use U.S and China tension as an example, in this case the speed of the shipping is not playing a major role anymore, the possibilitie of rejecting or accepting for customs is actually play a bigger role. If a company spent 80% more money on expensive air shipping but all the goods got rejected or stucked in customs’ warehouse for a long time. Then the extra 80% money doesn’t work well as it should be. So under this condition, each company should understand the risks and opportunity costs got involved in this decision making process and try to use the less risky one to at least keep the logistic flow. Piroritze products, change design, explore new sources and leverage existing suppliers should be relatively easier to conduct and more flexible than the rest of options. The reasons are that not much adjustments and initial investment need to be put to make the changes. A mature manufacturer has their production line set up already and should be ready to use any time if needed. The major cost gets involved is the switching time cost. It might take a while to switch current production line to specific one but this cost can almost be ignored when compares to opening a new producting line in most of the cases. And under current industry environment, raw material cost is no longer a mystery. All suppliers need to make their prices competitive to stay in the business, aslo they are all more willing to make small changes to meet manufactures’ needs to keep the relationships ongoing. So if company decideds to swith or adjust the raw materials, less efforts need to be made. As for builing a buffer, I can see there is a direct capital involvemnt. They first one is from the payments to workers, especially during the pandemic. It’s getting hard and expensive to hire the same amount people than usually do. Compaines might need to pay 3 to 5 times more to have this job done. Another one is the storage cost, it might not sounds it’s bad enough to impact the cash flow but since manufacturers are heavily relying on cash. This factor should not be neglected.
When supply chain and risk management managers considered potential disruptions to the flow of materials, the risk of a global pandemic such as COVID-19 would have been challenging to foresee. The long-standing effects of this pandemic are unprecedented, especially when we consider the fact that the outbreak began in China, a country which supplies countless manufacturers with materials.
An important factor to consider in answering the question of how quickly alternatives can be implemented is the overall impact long-term on the business. Just because a method may be quickly implemented, doesn’t necessarily mean it’s a wise choice to pursue. The most timely method to the six adaptions for flexibility would be a change in design. This is because the responsibility for safety is a high liability and any deviance in functionality could have major impacts on the manufacturer; research, design, and change must be taken slowly to safeguard the company. Another adaptation that would take multiple months to be successful is building a buffer. The company must have the available assets and space to store materials that are accumulated.
Methods of flexibility that would take modest time to establish would be prioritizing products (most likely to be cost effective in the long run) and exploring new sources. Exploring new sources would introduce dual sourcing, which could have potential benefits and potential risks. Cost could be an issue because if you split between multiple suppliers, then volume pricing on purchases may be reduced. However, the opposite could also be true as leveraging multiple suppliers may drive competition, innovation, and keep any one supplier from having the upper hand in the purchasing partnership. Ideally suppliers should be in different geographic locations as a safeguard.
The quickest, yet potentially most costly adaptation, would be changing the shipping method. Surely air freight would arrive much quicker, but cumbersome, heavy objects will cost significantly more to travel by plane versus sea freight. For flexibility during catastrophic times, this method is good to be aware of. Finally, leveraging existing suppliers is quick to implement but doesn’t mitigate risk when the supplier warehouses are located within the same geographical area (as seen with China during COVID).
While all six of these flexibility methods have their own pros and cons, they each should be considered in their own respect as manufacturers look to increase flexibility in their supply chain.
When risk management and supply chain managers considered potential disruptions to the flow of materials, the risk of a global pandemic such as COVID-19 would have been challenging to foresee. The long-standing effects of this pandemic are unprecedented, especially when we consider the fact that the outbreak began in China, a country which supplies countless manufacturers with materials.
An important factor to consider in answering the question of how quickly alternatives can be implemented is the overall impact long-term on the business. Just because a method may be quickly implemented, doesn’t necessarily mean it’s a wise choice to pursue. The most timely method to the six adaptions for flexibility would be a change in design. This is because the responsibility for safety is a high liability and any deviance in functionality could have major impacts on the manufacturer; research, design, and change must be taken slowly to safeguard the company. Another adaptation that would take multiple months to be successful is building a buffer. The company must have the available assets and space to store materials that are accumulated.
Methods of flexibility that would take modest time to establish would be prioritizing products (most likely to be cost effective in the long run) and exploring new sources. Exploring new sources would introduce dual sourcing, which could have potential benefits and potential risks. Cost could be an issue because if you split between multiple suppliers, then volume pricing on purchases may be reduced. However, the opposite could also be true as leveraging multiple suppliers may drive competition, innovation, and keep any one supplier from having the upper hand in the purchasing partnership. Ideally suppliers should be in different geographic locations as a safeguard.
The quickest, yet potentially most costly adaptation, would be changing the shipping method. Surely air freight would arrive much quicker, but cumbersome, heavy objects will cost significantly more to travel by plane versus sea freight. For flexibility during catastrophic times, this method is good to be aware of. Finally, leveraging existing suppliers is quick to implement but doesn’t mitigate risk when the supplier warehouses are located within the same geographical area (as seen with China during COVID).
While all six of these flexibility methods have their own pros and cons, they each should be considered in their own respect as manufacturers look to increase flexibility in their supply chain.
When risk management and supply chain managers considered potential disruptions to the flow of materials, the risk of a global pandemic such as COVID-19 would have been challenging to foresee. The long-standing effects of this pandemic are unprecedented, especially when we consider the fact that the outbreak began in China, a country which supplies countless manufacturers with materials.
An important factor to consider in answering the question of how quickly alternatives can be implemented is the overall impact long-term on the business. Just because a method may be quickly implemented, doesn’t necessarily mean it’s a wise choice to pursue. The most timely method to the six adaptions for flexibility would be a change in design. This is because the responsibility for safety is a high liability and any deviance in functionality could have major impacts on the manufacturer; research, design, and change must be taken slowly to safeguard the company. Another adaptation that would take multiple months to be successful is building a buffer. The company must have the available assets and space to store materials that are accumulated.
Methods of flexibility that would take modest time to establish would be prioritizing products (most likely to be cost effective in the long run) and exploring new sources. Exploring new sources would introduce dual sourcing, which could have potential benefits and potential risks. Cost could be an issue because if you split between multiple suppliers, then volume pricing on purchases may be reduced. However, the opposite could also be true as leveraging multiple suppliers may drive competition, innovation, and keep any one supplier from having the upper hand in the purchasing partnership. Ideally suppliers should be in different geographic locations as a safeguard.
The quickest, yet potentially most costly adaptation, would be changing the shipping method. Surely air freight would arrive much quicker, but cumbersome, heavy objects will cost significantly more to travel by plane versus sea freight. For flexibility during catastrophic times, this method is good to be aware of. Finally, leveraging existing suppliers is quick to implement but doesn’t mitigate risk when the supplier warehouses are located within the same geographical area (as seen with China during COVID).
While all six of these flexibility methods have their own pros and cons, they each should be considered in their own respect as manufacturers look to increase flexibility in their supply chain.
When risk management and supply chain managers considered potential disruptions to the flow of materials, the risk of a global pandemic such as COVID-19 would have been challenging to foresee. The long-standing effects of this pandemic are unprecedented, especially when we consider the fact that the outbreak began in China, a country which supplies countless manufacturers with materials.
An important factor to consider in answering the question of how quickly alternatives can be implemented is the overall impact long-term on the business. Just because a method may be quickly implemented, doesn’t necessarily mean it’s a wise choice to pursue. The most timely method to the six adaptions for flexibility would be a change in design. This is because the responsibility for safety is a high liability and any deviance in functionality could have major impacts on the manufacturer; research, design, and change must be taken slowly to safeguard the company. Another adaptation that would take multiple months to be successful is building a buffer. The company must have the available assets and space to store materials that are accumulated.
Methods of flexibility that would take modest time to establish would be prioritizing products (most likely to be cost effective in the long run) and exploring new sources. Exploring new sources would introduce dual sourcing, which could have potential benefits and potential risks. Cost could be an issue because if you split between multiple suppliers, then volume pricing on purchases may be reduced. However, the opposite could also be true as leveraging multiple suppliers may drive competition, innovation, and keep any one supplier from having the upper hand in the purchasing partnership. Ideally suppliers should be in different geographic locations as a safeguard.
The quickest, yet potentially most costly adaptation, would be changing the shipping method. Surely air freight would arrive much quicker, but cumbersome, heavy objects will cost significantly more to travel by plane versus sea freight. For flexibility during catastrophic times, this method is good to be aware of. Finally, leveraging existing suppliers is quick to implement but doesn’t mitigate risk when the supplier warehouses are located within the same geographical area (as seen with China during COVID).
While all six of these flexibility methods have their own pros and cons, they each should be considered in their own respect as manufacturers look to increase flexibility in their supply chain.
Building a resilient supply chain is the need of the hour. All the six methods mentioned are relevant, but whether they are viable depends on the industry and the products it manufactures. If a company plans to switch the mode of transport, the substantial difference (mostly increase) in costs may affect the overall profit margins. However, it is an effective method to recover from the present crisis.
In my opinion, changing designs will require extensive research and may not be considered a short-term solution. Nevertheless, an effective design substitute can be beneficial in the long run.
As we learned in class, building a buffer will have tradeoffs. Higher inventory holding costs associated can offset any profit made.
Prioritizing products is a method that any industry can implement in a short period of time. The company can manage the loss in sales of a low volume good by an increase in sales of high-volume goods.
Suppliers will be more than willing to adapt to the conditions and help the company. The existence of the suppliers is dependent on the performance of the company.
Exploring new sources should be considered a long-term solution. A buyer supplier relationship is built on years of trust and cannot be emulated in a short period of time. However, it can be thought of as a backup.
Building resilience in the supply chain, especially after the pandemic, has been more about building “redundancy” in the network. An HBR article that I read recently, speaks about how the focus now, has shifted from cost effective efficiency (be it utilization or supplier selection) to developing a more sustainable, flexible and in turn resilient network of players. The recommendations in this blog boil down to the same 4C’s of supply chain. But what should be the prime focus in this hour, is the sustainability of these decisions. For example, just because building buffer inventory is the need of the hour doesn’t mean organizations will continue with this strategy as the ramifications of this pandemic taper off. Some are bound to move back to their lean philosophies. Decisions regarding changing freight mode may not be financially sustainable in the longer run. Then what matters is the level of preparedness (in terms of resilience) against the degree to which a customer is willing to bear the expense of it. Competitiveness suffers when adding redundancy in normal circumstances, but attempts at recuperation warrant these changes. Building supplier capabilities, creating shared value, maintaining relationships as well as dual sourcing have thrived even in normal circumstances.
As a plan of action, I feel the quickest changes should be prioritizing products, having multiple sources for them and having accelerated shipment of these 20% products that are high volume fast moving. Building local capabilities by starting with the slow moving goods, creating value, reshoring, and building relevant buffers are gradual, long term, company specific tactical decisions that will act as another layer of resilience. Cost of building resilience as a risk mitigation strategy is an investment towards a sustainable future and given the demand rate, strategies could be tweaked to build efficiency in the system.
When risk management and supply chain managers considered potential disruptions to the flow of materials, the risk of a global pandemic such as COVID-19 would have been challenging to foresee. The long-standing effects of this pandemic are unprecedented, especially when we consider the fact that the outbreak began in China, a country which supplies countless manufacturers with materials.
An important factor to consider in answering the question of how quickly alternatives can be implemented is the overall impact long-term on the business. Just because a method may be quickly implemented, doesn’t necessarily mean it’s a wise choice to pursue. The most timely method to the six adaptions for flexibility would be a change in design. This is because the responsibility for safety is a high liability and any deviance in functionality could have major impacts on the manufacturer; research, design, and change must be taken slowly to safeguard the company. Another adaptation that would take multiple months to be successful is building a buffer. The company must have the available assets and space to store materials that are accumulated.
Methods of flexibility that would take modest time to establish would be prioritizing products (most likely to be cost effective in the long run) and exploring new sources. Exploring new sources would introduce dual sourcing, which could have potential benefits and potential risks. Cost could be an issue because if you split between multiple suppliers, then volume pricing on purchases may be reduced. However, the opposite could also be true as leveraging multiple suppliers may drive competition, innovation, and keep any one supplier from having the upper hand in the purchasing partnership. Ideally suppliers should be in different geographic locations as a safeguard.
The quickest, yet potentially most costly adaptation, would be changing the shipping method. Surely air freight would arrive much quicker, but cumbersome, heavy objects will cost significantly more to travel by plane versus sea freight. For flexibility during catastrophic times, this method is good to be aware of. Finally, leveraging existing suppliers is quick to implement but doesn’t mitigate risk when the supplier warehouses are located within the same geographical area (as seen with China during COVID).
While all six of these flexibility methods have their own pros and cons, they each should be considered in their own respect as manufacturers look to increase flexibility in their supply chain.
How quickly can each of these alternatives be leveraged to build in resilience?
I divide those 6 alternatives into three category to estimate how quick they can be implemented.
I estimate that two solutions can be implemented quickly in a matter of days. Prioritize products and leverage existing suppliers. Indeed, a company can decide very quickly to focus on producing or offering fewer products to smooth their operations and gain in efficiency. Moreover, a leveraging existing supplier should be quick as well because you already work with them and they are very eager to help and produce extra goods because they suffer as well from the crisis.
I estimate that two solutions take more time than the two previous one and would necessitate potentially weeks. It is to build a buffer and switch modes. Indeed, changing completely the way you transport goods can represent lot of work. Indeed, you need to find enough planes and pilots. Moreover, the quantity of goods that can be delivered in a airplane is much smaller than by boats. Building an inventory buffer for most products take lots of time because it depends of production planning and cash flow.
Finally, I think the longest-term solutions are changing the designs and explore new sources. I think it can take months. Indeed, changing the design of products create lot of unknow, necessitate test and lot of work even before starting to produce. Moreover, starting to work with new suppliers generate lot of extra work and time before being able to enter in production phase.
Do these suggestions imply dual sourcing?
The two suggestions that implies dual souring in my opinion are switch modes and explore new sources. Indeed, in the first one, it proposes a new way to transport goods and in the second one a new additional way to procure goods.
Will costs increase as a result?
Cost will obviously increase as a result because you need to implement lot of changes and extra work simply to maintain the service level you previously had. All those solutions are costly.
In such an unprecedented time for manufacturers, suppliers, retailers, etc. it is easier to look back and recommend future changes to execute in order to better prepare for uncertainties, but at what price and to what degree should they prepare is my concern, given the rarity of such an event.
Two areas that stood out to me with regards to the article are obtaining more suppliers for an increase in options and creating buffers to help offer support when operations slow down or come to a halt.
Having several options for suppliers is a great start but can sometimes lead to contractual problems between suppliers as well as more complexity when ordering materials. However, having several suppliers can definitely help avoid problems in the supply chain due to the fact you now have options from more than just one place.
With regards to buffers, they are a great way to prepare for unexpected events, but how big of a buffer does a company plan to create? One that is good for 60 days, 90 days, half a year? It is very rare for an event like COVID-19 to occur, which raises the concern as to what effect does something like this have on a company and how many supplies should be kept aside when everything shuts down. The longer the buffer, the greater the costs associated with making the goods as well as the inventory costs. At some point, it is unreasonable to have a certain sized buffer, and finding that point is probably the hardest part when expecting the unexpected.
All in all, companies that implement the topics mentioned in the article will probably be much better prepared for an event like the pandemic in the future. However, Senior leaders and upper management will have to decide which things makes sense for their company to execute and which things should not.
Building resilience in supply chains once suppliers are affected especially in the midst of a pandemic is a difficult and unprecedented feat. As mentioned in the article, the main way for manufacturers to make it through such a difficult time is to be flexible. The six ways of increasing flexibility mentioned (switching modes, changing designs, building a buffer, prioritizing products, leveraging existing suppliers, and exploring new sources) can all have effects on how quickly they can be leveraged to build resilience, the amount of sourcing needed, and increasing costs incurred:
Switching Modes of transportation for goods, whether it be faster or slower than the normal mode of transportation will require either an extended time frame for something like moving goods by sea instead of air or vice versa to incur a higher price as well as potentially running into contract issues with current or new suppliers.
Changing Designs for product specifications will more times than not include a higher cost to the manufacturer as well as a possible change to the process flow and timeline.
Building a Buffer that will minimize the effects of being out of inventory is not only a resilience factor for something like a pandemic, but something that should be built into any supply chain at any given time. The effects on time, cost, and sourcing to make a buffer in inventory possible will be more than worth it when it is eventually needed.
Prioritizing Products during a pandemic is paramount and will of course lead to a loss of profits for low-volume products as well as increasing cost to produce more high-volume products, but will also ensure the sales of the high-volume product in high demand.
Leveraging Existing Suppliers with most of them wanting to help manufacturers based on their dependence on equipment for moving products, leveraging the ones you have can help offset increased costs elsewhere.
Exploring New Sources while potentially more expensive and time consuming, some suppliers will have more/differing contacts and merchandise that your current ones may not.
However, despite all of the changes to timelines, sourcing needs, and increased costs, having room for an alternative contingency plan in place for any part of the supply chain to be changed is the quickest way to bounce back from any unplanned/disruptive event.
In my view, the first thing that needed to be critically evaluated is the tradeoff between building a resilient supply & the extent of it vs the cost & complexities associated with it. And a major part of this evaluation would lie on the current business operations like the current portfolio of products and their respective supply chains for functional products vs innovative products, the current infrastructure capabilities, and the scaling flexibilities. While supply chain flexibility is one aspect to build a more resilient supply chain, there are other factors like supply chain visibility and coordination that needs to be considered in order to incorporate those flexibilities into the supply chain. A key part of the answer to how quickly each of these 6 ways can be leveraged would depend on the relationship developed with the key supply chain partners, the extent of visibility of the data across the entire supply chain network, and the coordination between each functional unit of the supply chain. Moreover, the implementation of these initiatives would definitely come with some cost. However, the question would be to evaluate how these insured costs impact the bottom line in the long run.
Building a resilient supply chain would benefit a company to save itself from unforeseen circumstances. The six ways of building alternatives are all viable, but each one of them might be relevant only to a particular time or might involve additional costs.
For example,
1. To satisfy demand air transport might be used, however, it increases the costs by many folds. However, companies might want to keep the customer satisfaction high and so might incur such costs to maintain good relationship with the customer. I believe at these times of global pandemic customers understand and might be considerate. Also, due to the pandemic, air traffic has also been paralyzed which might strike this option out.
2. Coming up with new designs takes a lot of time and research. For a few industries this might be possible to be done quickly, but for many this might not be possible at all.
3. Build a buffer – Building a buffer is quite an option, but nobody can speculate such a pandemic and so keeping a lot of buffer would not have made sense for companies as there is a huge inventory cost linked to it. Practically speaking companies cannot be prepared for such catastrophes by having huge inventories.
4. Prioritizing products – This way can be effective if a company does assembly postponement where the raw materials for the products that are not so important can be used to make the prioritized items. This step would be helpful and could be adopted quickly at not much additional cost.
5. Leverage existing suppliers is quite possible and companies could sit together and collaborate with suppliers to come up with new options of using the existing raw materials and resources to plan out an action plan together so as to mitigate the losses and work around the global current issue. Depending on the plan there are chances of having a better plan that could be cost effective as well.
6. Getting back to the list of suppliers who had bid during the initial bidding and renegotiating with other suppliers is one of the best option. Although there might be a little boost in the cost, but at least the continuity in the supply chain flow could probably be restored and might increase the revenue for companies.
This global pandemic has been quite a big lesson learnt for all the companies across the globe that each company has realized the importance of dual or multiple sourcing. This sourcing was not simply rooted to any two suppliers, but is most importantly linked to having suppliers for 2 different geographic locations or countries. Thus companies have started scouting for options in India and are trying to build new manufacturing plants in other countries of cheap labor such as India. Companies such as Apple etc have invested billions of dollars in India to build new plants so as to mitigate future catastrophic disasters such as today’s.
Post by Wenzheng Jiang,
These six ways are reasonable and could definitely help businesses remain resilient during coronavirus disruption. At the same time, these ways could be different:
1. Switch modes: This will undoubtedly build in resilience as quickly as possible, and at the same time greatly increase the cost. This is not dual sourcing.
2. Change designs: If the company has a suitable alternative material B, resilience can be built at a faster rate. This could mean dual sourcing. Whether the cost increases depends on the price of material B compared to material A. However, this may lead to an increase in hidden costs (and a decrease in benefits): some consumers may choose not to buy because of material changes or spread bad word of mouth.
3. Build a buffer: It can help build resilience early in the pandemic. This is not dual sourcing. As long as the factory can ensure the timely resumption of work, there will be no increase in costs.
4. Prioritize products: Build resiliency faster. According to news reports, some big brands stopped producing perfume during the epidemic and instead used the production line to produce disinfectant. This is a good way to meet current consumer demand. Help to increase revenue and save costs. This is not a dual source.
5. Leverage existing suppliers: If the supplier does have the ability to meet the specific needs of the manufacturer, it will quickly build in resilience. This is a win-win model and should not increase costs. This is not dual sourcing. On the contrary, if the supplier does not have this ability, it will not be able to quickly establish the resilience of the supply chain, and the cost will increase.
6. Explore new resources: Build resilience quickly. It could mean double sourcing. And it can reduce the cost.
When it comes to handling the crisis created in these unexpected times, the foremost aspect is to “Prioritizing products”. This can be done in various ways depending on:
1) Customers – based on their past experience, the business they bring in to the organisation.
2) Profitability of the product – No business can run for long with heavy cash crunch. They need to find a way to keep the wheel moving. Therefore, prioritizing profitable products is of key importance
I would say, switching modes is a fairly quicker option compared to changing designs and exploring new sources but this might be a difficult for products which are very bulky example: heavy machinery. Covid situation is an eye-opener in many ways as to how one shouldn’t complete rely on any particular mode/country for any particular component. It is important they build alternative ways which can be achieved through 1) explore the new resources, 2) Change Designs 3) Build a buffer . Also, these periods have tested companies with their response time to such crisis. It is really crucial for organisations to evaluate and quickly act to remain at the top of their game.
It definitely looks like businesses need to have alternatives in every step of the process, this could mean dual sourcing. Dependence on any one factor may become a bottle neck in a crisis time like the one the world is facing. Therefore, dual sourcing is the need of the hour. But at the same time, it is important for every industry/company to see if this is worthy by running a cost benefit analysis.
All these new impacts may or may not result in increase in costs. As it is mentioned in the article, exploring new sources which may have not been considered before might actually help organisations reduce their overall costs. One such argument is local sourcing.Example: A company sourcing from a foreign land now chooses to buy the same raw material locally. Though this would definitely reduce the shipping costs but may or may not reduce the overall cost of the product. It may so happen that local sources might be ready to reduce prices which will be feasible to the organisation. Therefore, it is time to re-evaluate all the existing contracts and look at things with a perspective to optimize the supply chain, costs and get businesses on track.
Switch modes: Switch mode from by sea to by air could increase transportation costs and could also be very time-consuming. Although the advantage here is the speed of delivery of products. Waiting time is reduced.
Change designs: Change designs will increase the material costs and labor fees. Changing the design would probably mean incorporating a new material, which would then mean searching for new suppliers and carrying out some supplier analysis, risk analysis and market research, which all takes time.
Build a buffer: Building a buffer will increase the costs. Buffer inventory only means higher inventory holding costs. This will also require a high investment. A buffer proves very useful when considering pulling through and minimizing effects of supply chain disruptions. However, as we could see in the case of toilet papers in 2019, if we needed a buffer, it would mean keeping a very large inventory daily, which is inconvenient and the buffer is also depleted very quickly.
Prioritize products: I believe this is a wise move, which involved less risk. Focus is put on the most popular products and profits can stay up. However, prioritizing products could also lose profits due to lack of availability of other popular products customers enjoy. And also may require new labor, new machines and increased capacity, which consumes money.
Leverage existing suppliers: I believe this is also low-risk and wise. There are lower risks, and it means using existing suppliers and negotiating to keep business going. This should be fairly easy to conduct compared to the other options here. But a lot depends on if the existing suppliers can satisfy the new demands.
Explore new sources: This can be really time-consuming, because developing new relationships and trust with suppliers can take a lot of time, and shouldn’t be rushed. Exploring new sources can increase the manufacturing cost by bidding with other companies or exploring new resources.
As for dual sourcing, it is a very wise route to take, especially during such times where a global pandemic is rampant. Dual-sourcing allows to outsource the product from another supplier, saving time and shortages. Dual-sourcing can help reduce waiting times throughout the entire supply chain and can helps retailers to meet spikes in the demand. This approach may take a long time to set, but is well worth it in the long-term for companies.
Considering all issues and disruption in supply chain caused by the COVID-19 pandemic for all industries, especially those whose suppliers are located on the other side of the globe, brings to the table important decision to be taken by managers and supply chain networks to address and overcome these difficulties. So, in order to find quick solutions and continue to supply the market/demand some of the ways for building resilience seemed to be more effective that others depending on the type of product as well. For example, for mask and medical protection equipment, hospitals and governments had to explore new sources, locally or from neighboring countries suppliers instead of relying on their usual supplier production; also by leveraging existing suppliers who might have never produce this kind of product but had the right equipment and the flexibility to change the course of their usual production, using their resources to produce a complete different product as the usual, since the market demanded desperately. Other example of leveraging existing suppliers was the case of business that produce alcoholic beverages who decided to start producing hand sanitizers.
I believe that most companies understand now the importance to redesign their supply chain and become more resilience, in other words is necessary to plan not only for a just in time production but instead plan for just in case. But these changes seemed to also come, in most industries, with additional costs, as it happens when building excess inventory for safety stock, or buffer in capacity. Also when talking about diversification of suppliers this will mean an increase cost, because working with several suppliers in different locations is always going to be more expensive, but at the end of the day this will allow them to continue doing business instead of having a whole production disrupted.
Considering all issues and disruption in supply chain caused by the COVID-19 pandemic for all industries, especially those whose suppliers are located on the other side of the globe, brings to the table important decision to be taken by managers and supply chain networks to address and overcome these difficulties. So, in order to find quick solutions and continue to supply the market/demand some of the ways for building resilience seemed to be more effective that others depending on the type of product as well. For example, for mask and medical protection equipment, hospitals and governments had to explore new sources, locally or from neighboring countries suppliers instead of relying on their usual supplier production; also by leveraging existing suppliers who might have never produce this kind of product but had the right equipment and the flexibility to change the course of their usual production, using their resources to produce a complete different product as the usual, since the market demanded desperately. Other example of leveraging existing suppliers was the case of business that produce alcoholic beverages who decided to start producing hand sanitizers.
I believe that most companies understand now the importance to redesign their supply chain and become more resilience, in other words is necessary to plan not only for a just in time production but instead plan for just in case. But these changes seemed to also come, in most industries, with additional costs, as it happens when building excess inventory for safety stock, or buffer in capacity. Also when talking about diversification of suppliers this will mean an increase cost, because working with several suppliers in different locations is always going to be more expensive, but at the end of the day this will allow them to continue doing business instead of having a whole production disrupted.
Considering all issues and disruption in supply chain caused by the COVID-19 pandemic for all industries, especially those whose suppliers are located on the other side of the globe, brings to the table important decision to be taken by managers and supply chain networks to address and overcome these difficulties. So, in order to find quick solutions and continue to supply the market/demand some of the ways for building resilience seemed to be more effective that others depending on the type of product as well. For example, for mask and medical protection equipment, hospitals and governments had to explore new sources, locally or from neighboring countries suppliers instead of relying on their usual supplier production; also by leveraging existing suppliers who might have never produce this kind of product but had the right equipment and the flexibility to change the course of their usual production, using their resources to produce a complete different product as the usual, since the market demanded desperately. Other example of leveraging existing suppliers was the case of business that produce alcoholic beverages who decided to start producing hand sanitizers.
So, in order to think to the future, I believe that most companies understand now the importance to redesign their supply chain and become more resilience, in other words is necessary to plan not only for just in time but instead plan for just in case.
But these changes seemed to also come in most industries with additional cost, as it happens when building excess inventory for safety stock, or buffer in capacity. Also when talking about diversification of suppliers this will mean an increase in production cost, because working with several suppliers in different locations is more always going to be expensive, but at the end of the day this will allow them to continue doing business instead of having a whole production disrupted.
In a situation such as the pandemic, the flexibility of a brand is really crucial. If it has existing relationships with multiple suppliers who have the capability to produce multiple products, the brand has managed to hedge risks across suppliers and is thus safer. In case the suppliers are present in different countries, this is even better. However, the real question is that in a normal situation (pre-pandemic), how does the brand manage both suppliers – if they split customer zones and volumes, their unit cost might be higher than it would be if they produce it together through one supplier. The difference would then be the cost of the aforementioned flexibility, that is now helping the brand cope in a global emergency such as the pandemic. Solutions such as alternative shipping modes, change in material / design, building finished goods inventory are possible in this case since at least one of the two suppliers will be producing for the brand.
During pandemic period, it is always better to keep flexible to quickly respond to actual demand. Nowadays, flexible and lean production gets more and more imporatant . The first way is to change modes. This point is the way to switch to the way that can finish the order quickly. We don’t want to keep too many inventories due to higher holding costs, and the longer lead time causes uncertainties. For example, during pandemic, people orders mask more frequently, and that’s why supplilers use air mode to ship masks because demand could be satified in right time. The second way is change designs. This also helps comapnies to find out more sources so that it won’t take a risk of relying on a single supplier. What I heard is also related to masks. Some mask producer find out alternative way to produce masks without sacrficing the safety and also produce masks that have the same specification. This also makes them reduce some sort of costs because they find out another sources or materials that are relatively cheaper.
Build a buffer is a way that every manufacturing companies should focus on. During pandemic, some groceries like toilet papers were out of stock for a long time. Build a buffer can help producers handle abrupt demand of groceries. We should also focus on priortize products to respond to actual demand faster. With ABC classificaiton, we spend more time categorizing stocks in the warehouse so that we might know what type of goods should be priortized with higher demand. Leverage existing suppliers can maintain the flow and keep the value of flows. Once suppliers can not meet the standard of customers or are not qualified anymore, it is better to switch their suppliers to ones who perform better.These six ways actually are important to manufacturing companies, especially during COVID-19 pandemic.
During pandemic period, it is always better to keep flexible to quickly respond to actual demand. Nowadays, flexible and lean production gets more and more imporatant . The first way is to change modes. This point is the way to switch to the way that can finish the order quickly. We don’t want to keep too many inventories due to higher holding costs, and the longer lead time causes uncertainties. For example, during pandemic, people orders mask more frequently, and that’s why supplilers use air mode to ship masks because demand could be satified in right time. The second way is change designs. This also helps comapnies to find out more sources so that it won’t take a risk of relying on a single supplier. What I heard is also related to masks. Some mask producer find out alternative way to produce masks without sacrficing the safety and also produce masks that have the same specification. This also makes them reduce some sort of costs because they find out another sources or materials that are relatively cheaper.
Build a buffer is a way that every manufacturing companies should focus on. During pandemic, some groceries like toilet papers were out of stock for a long time. Build a buffer can help producers handle abrupt demand of groceries. We should also focus on priortize products to respond to actual demand faster. With ABC classificaiton, we spend more time categorizing stocks in the warehouse so that we might know what type of goods should be priortized with higher demand. Leverage existing suppliers can maintain the flow and keep the value of flows. Once suppliers can not meet the standard of customers or are not qualified anymore, it is better to switch their suppliers to ones who perform better.These six ways actually are important to manufacturing companies, especially during COVID-19 pandemic.
The six ways shared provide insights into navigating through uncertainties in pandemic times. Based on the industry trends, companies are taking a long-term view in diversifying their supplier base for risk mitigation and while this move may bring in short term pressures for cost increase, in a longer term these strategies remain viable. The response time these alternatives provide for building resilience are:
1) Switch modes: Greater flexibility in moving critical customer shipments via air than sea even though costlier. Sea shipments have more uncertainty in case they dock at 2-3 different ports before reaching destination. Long term air contracts for few shipments can also be evaluated.
2) Change Designs: Increased options company can provide to customers in order to substitute demand of out of stock products with alternate SKU’s. While this may create initial investment costs from R&D and manufacturing perspective, companies can use this tool to substitute imports via in-house production.
3) Build Buffer: Provides a good alternative in readily reacting to change in customer demand. Building inventories at own warehouses or safety stocks kept at vendor’s end are effective in catering to customers demand.
4) Prioritize products: While it may seem prudent to deliver products with higher bottom line first, orders for important customer can also be focused even though they might be having lesser bottom line.
5) Leverage existing suppliers: In the shorter term, keeping smooth supply of products is essential hence it is ideal to build upon relationship with existing suppliers and evaluate further partnerships in terms of joint venture or contract manufacturing post pandemic.
6) Explore new sources: COVID-19 has helped companies gauge the capabilities of existing suppliers in terms of delivery commitments as well as managing production at their end. This has provided companies opportunities to map and explore new opportunities to diversify risk and build new relationships.
Exploring new resources and leveraging existing suppliers would be the quickest way to see impactful result. Prioritising products and switching modes might be next in line when it comes to the required time to show results. It can be said that redesigning or keeping a buffer although would require more time and effort seem to be more promising in terms of impact as the gain would be measurable and predetermined. Dual sourcing will need data analysis to be effective but will definitely reduce the load on a specific supplier who might be under producing because of the pandemic as well.
Strategic procurement and dynamic production line to adhere to the continuously changing market needs would be beneficial
In the article, there are 6 different supply chain alternatives mentioned so that the company can still meet demand: switch modes, change designs, build a buffer, prioritize products, leverage existing suppliers, and explore new sources. All alternatives can be leveraged to capitalize on flexibility and build resilience, but some will take longer and require varying costs.
– Switching modes of transportation, from sea to air, can be implemented quickly but will resulted in significantly higher costs. Air freight is often multiple times more expensive than sea freight, but lead time will be struck by more than half.
– Changing the design of products to allow for more variation in specs would not come at a significantly increased cost, but depending on the company, it may take a while to get approval to make even small changes in design. Going forward, companies should make contingency plans that allow for quick implementation of design changes in cases of severe supply shortage.
– After a supply disruption hits, it will not be possible to implement a supply buffer. Companies will need to consider having larger buffers in the future, however, this should only be done as necessary, as carrying excess inventory not only brings increased holding costs but also ties up capital.
– Prioritizing products is a quick and cost-effective means of reacting to a supply disruption. However, doing so will lead to lost sales of less popular products, damage relationships with those customers, and potentially hurt company reputation.
– Leveraging existing suppliers will benefit your relationship with them. Agreeing to terms of a sale with an existing supplier would be rather quick compared to a new supplier, and it may even come with price discounts due to your ongoing relationship. However, if the supplier is producing an item outside their typical scope, quality may be a reasonable concern.
– Exploring other suppliers in a shortage might be a rather quick process, but determining the terms of a contract or sale could take longer. Also, sourcing from these suppliers will come at a higher cost than your current supplier.
I believe the velocity of each of the decisions will depend on the beliefs of an organisation and the scenario and their priorities among customer satisfaction, profit margins, quality etc while managing the supply chain. A resilient supply chain is one that is capable of overcoming foreseeable SC risks. While the switching modes will help to decrease the lead time significantly and build a step towards lean supply chains, it will also increase the transportation cost per product. Similarly,’ Change designs’ and ‘Prioritize products’ focus on decreasing the cost without compromising the functionalities and availabilities. Building a buffer/ larger safety stock will help in maintaining a satisfactory fill rate in case of supply uncertainty but will also increase the inventory holding cost. maintaining relations with existing suppliers will help in prioritizing the supply in times of uncertainty and exploring other options helps in reducing the supply risks.
For the COVID-19 scenario, I believe that if a company is reliant on a few suppliers, especially on overseas suppliers, then Explore new sources that are nearer will help in mitigating the supply risk.
This pandemic has forced changed abruptly the way companies have been operation. It is very interesting to learn how companies have been responding to the pandemic and the six points mentioned in the news report are interesting aspects to be analyzed in order to create a more resilient supply chain, that can overcome crisis periods.
In recent years, companies have been focusing a lot in efficiency and how to align better supply and demand, creating leaner organizations. However, this created out of stocks and other problems to the companies during the pandemic. I believe that it will be very interesting to see how companies find the balance in between resiliency and being a lean organization to avoid supply shortage. It is important for companies to have back up plans that can guide the company to transform quickly in crisis periods.
For example, some companies have “war-time ready”, meaning that the plant must be able to be converted to produce wartime essential products in a specified amount of time. I having a similar approach towards how to transform the plant quickly, focusing on their core products during crisis times will be key in building stronger supplier relationships and make the supply chain more resilient, enabling companies to overcome periods of crisis.
This pandemic has forced changed abruptly the way companies have been operation. It is very interesting to learn how companies have been responding to the pandemic and the six points mentioned in the news report are interesting aspects to be analyzed in order to create a more resilient supply chain, that can overcome crisis periods.
In recent years, companies have been focusing a lot in efficiency and how to align better supply and demand, creating leaner organizations. However, this created out of stocks and other problems to the companies during the pandemic. I believe that it will be very interesting to see how companies find the balance in between resiliency and being a lean organization to avoid supply shortage. It is important for companies to have back up plans that can guide the company to transform quickly in crisis periods.
For example, some companies have “war-time ready”, meaning that the plant must be able to be converted to produce wartime essential products in a specified amount of time. I having a similar approach towards how to transform the plant quickly, focusing on their core products during crisis times will be key in building stronger supplier relationships and make the supply chain more resilient, enabling companies to overcome periods of crisis.
Diego Palacios
This pandemic has forced changed abruptly the way companies have been operation. It is very interesting to learn how companies have been responding to the pandemic and the six points mentioned in the news report are interesting aspects to be analyzed in order to create a more resilient supply chain, that can overcome crisis periods.
In recent years, companies have been focusing a lot in efficiency and how to align better supply and demand, creating leaner organizations. However, this created out of stocks and other problems to the companies during the pandemic. I believe that it will be very interesting to see how companies find the balance in between resiliency and being a lean organization to avoid supply shortage. It is important for companies to have back up plans that can guide the company to transform quickly in crisis periods.
For example, some companies have “war-time ready”, meaning that the plant must be able to be converted to produce wartime essential products in a specified amount of time. I having a similar approach towards how to transform the plant quickly, focusing on their core products during crisis times will be key in building stronger supplier relationships and make the supply chain more resilient, enabling companies to overcome periods of crisis.
Building resilience to absorb the disruptions in the supply chains caused by a pandemic is crucial for Suppliers. A few reasons that caused these disruptions were lockdowns of geographic areas which lead to a pause in manufacturing, panic buying by consumers which led to a surge in demand against a regular supply, reduction in demand leading to a relative excess supply in case of oil etc.
The six mechanisms mentioned creating resilience in supply chains have their benefits as well as cost implications.
Switch Modes: This may be a good way to bring SC’s back to normalcy after manufacturing resumes or when there is inventory that needs to be shipped as quickly as possible due to stock-outs. However, this has a limitation when manufacturing is at a standstill. Switching from Sea to Air also leads to an increase in cost.
Change Design and Explore New sources: This is an excellent strategy if the turn around time is short enough and the process is flexible enough to be changed without causing a lot of impacts. Innovation on this front can also help in exploring avenues that lead to cost reduction.
Build a Buffer: Analogous to seasonal safety stock. Companies can probably forecast keeping these disruptions in mind in the future, however, that can have cost implications based on inventory.
Prioritize Products: Completely agreed with this strategy. Prioritizing on essential products for the business and consumers is crucial in times of a pandemic. This will probably not have heavy cost implications as well.
Leverage existing suppliers: Producing commodities that are new for a supplier will have benefits in terms of manufacturing new products but will also have an increased cost associated with it. It is always important that a procurement team has backup suppliers or focuses on dual sourcing, especially from geographically varied locations so that in case one region is shut off, the other region can continue to supply to half the consumers.
I believe that switching from sea to air is not a viable way to gain resilience in many products. It can be as simple as costs, or that it may be hazardous to travel by plane with certain products. But many products will not be able to switch. Of course, there are some exceptions and companies should look into that possibility, especially with their star products.
Building stocks can have the same problem, costs. Better forecasting can be a good measure to counter the costs that companies will incur.
All this will end up with companies prioritizing certain products, which usually are their star products or the ones that are most needed and thus will be faster to sell.
Change the design, explore new markets can be great and can give new life to old products. This can be a good idea if the time taken for setup is short.
COVID-19 has already exposed the vulnerabilities of many organizations, especially those who have a high dependence on China to fulfill their need for raw materials or finished products. These six ways can be leveraged to build resilience for companies. But the time that companies need to be resilient through these ways will depend on different industries and rational utilization of the choices. In order to allocate limited resources due to the pandemic, the company should disengage in the production of less competitive products and resort to more profitable SKUs.
The impact and quickness can be very different among the six ways. Take the COVID-19 as an example, switching shipment modes can be very easy and effective to build resilience. However, this method can be valid if the production can not catch up. Buildup inventory can be a great way to make sure the company can fulfill the demand. However, the possible inventory holding costs can be very risky. To respond to the COVID-19, applied several ways at the same time can guarantee the supply. And the costs can be increased due to switching costs or higher holding costs, even higher purchasing and transportation costs.