Supply Chain Issues Hit HardMarch 31, 2021
When Just in Time Becomes Just Didn’t Make It
Supply chain disruptions cause 12% of world shipping to be blocked at the Suez Canal. Like the challenges that steamed during COVID-19, this is just another blow to business.
Before COVID, cost accountants would tell you that money tied up in stock is a waste of working capital.
Aside from cash flow, there were other negative issues, such as storage costs and the chance of products expiring, leading to wastage, something in today’s eco-aware times, which is less than ideal.
The mantra for many supply chain experts became a never-ending focus on supply chain optimization and product improvement. Where supply was on time and price was king. Ideally, this supply came from a single source.
As a result, we had removed buffers such as having safety stock on hand, reducing and shrinking our supply chain, and leaving us exposed, without the ability to absorb disruptions. Then we hit a Black Swan event – COVID-19.
We are all dealing with the concerns highlighted in the news headlines and are coping with the effects of COVID-19. As consumers, our new reality has become product shortages and delayed shipments.
Most ignored the early warnings, blaming COVID and hoping it would “work itself out,” but it hasn’t.
Added to this, we now have another one-off logistical event with a ship blocking the Suez Canal – creating more backlogs and causing the price of oil to go up.
The Importance of Supply Chain Resilience
What does a ship blocking the Suez Canal mean? It means we are in a situation where JIT becomes “Just Didn’t Make It” or “Just Delayed.” Costing your business and ultimately your customers.
So, what can you do? Unfortunately, not as much as you’d like! There is no magic wand that will unblock the supply chain bottlenecks.
However, you have a chance to prepare yourself for future disruptions – not all negative, by pre-empting changes, and yes this will cost, but not as much as empty warehouses, production line stoppages, and the inability to meet customer demand.
To start with, if you haven’t already, look at alternative supply sources. You might be able to source from an alternative supplier closer to your manufacturing and/or distribution centers that are not in the location of your current supplier.
There is a high chance there’s a premium for this when you look at the material cost alone, but offers more security of supply. Don’t drop your current supplier; instead, add a secondary supplier.
Disruption is the new Normal
Stick with the reality of disruption and factor it into everything you do, for this you’ll have to update your safety stock levels, min./max., and reorder point planning levels adding in insurance to reduce the chances of stock out.
You may need to create additional Purchase Orders with longer lead times to pre-empt a certain amount of disruption. For example, on average supplies will be late by a specific amount of time.
Change your product mix. There are plenty of examples where distilleries started making sanitizer, which is a massive pivot.
Maybe your company can do similar things, just for different businesses that are extremely busy due to the latest set of disruptions. Ideally, you’ve moved to a “recovery mode” and are looking at your longer-term plans.
Have you thought about Positive Disruption?
Let’s look at an example.
One day, COVID will not be a disruption. Pivoting to the post-COVID world will be diverse and full of opportunities. Once countries start seeing the light, those fortunate enough to be fully employed won’t be doing as much travel.
People will not be traveling as much because there aren’t pilots, let alone planes. What will they do with that extra money? Buy cars, and recreational toys, or perform household renovations!
If we look at places like New Zealand and Australia, people’s day-to-day lives are not that different compared to pre-COVID.
Tourism is the exception to this. Since people can’t go abroad, sales of boats, jet skis, bikes, and even wetsuits have gone through the roof.
As people escape the grip of COVID and after more than 12 months of disruption, other geographies will experience a spending boom.
How is your company adjusting to COVID? Are you preparing for the challenges like a ship stuck in the Suez Canal or people panicking and buying all the essential materials?
We realize there are unpredictable risks, but we need to act fast as they arise.
A single source of data is critical for quick response.
One thing you can do is have accurate and usable data in your ERP system. You need to plan and execute an alternative supply of materials in weeks, not months.
Also, you need to confirm that you aren’t caught short and sell products at a loss. Price list changes must be quick and proactive; therefore, you must ask yourself, can your users make timely, easy, and accurate changes?
From updating your item master, adding suppliers, purchases, and sales orders to adjusting price lists, you need to be able to make changes and make them quickly.
That’s why you need us. Unlock the true potential of Oracle EBS and Oracle Fusion Cloud ERP through a single Excel spreadsheet. Our tools provide faster, more accurate data loading across your entire business.
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