Supply Chain Diversification – the new normal

The world has shifted

The current global events is expected to have a significant impact on operating models and business dynamics. Organizations will have to adapt to the new normal and prime themselves for growth in a new environment.

Here are a few quotes from industry experts:

“The COVID-19 Pandemic is fast-tracking Digital Transformation in companies” – Forbes

“Global companies have to be predictive and proactive in their decision-making to preserve business continuity and build enterprise resilience” – Ernest Young

“Generating value while restarting your supply chain” – Bain & Company

“Its not business as usual, so don’t do business as usual” – Gains Group

This is specifically true for a company’s supply chains which are facing multiple challenges. So how does an organization respond to these challenges and reset a supply chain to make it robust and future proof?

Complex scenarios for Supply Chain Reset

It is clear that there will be two major trends for manufacturing companies when it comes to supply chains:

  • A dramatic shift from cost-focused single region limited supply chains to global distributed and diversified supply chains
  • Manufacturing will move from specialized and limited product lines to robust and scalable production lines that can be quickly repurposed

In addition to these trends, Enterprises are facing additional complexities:

  • Current global distributed supplier networks and logistics challenges are an imminent threat to supply continuity, leading to a domino impact on supplies, spare parts and production
  • To secure liquidity, the Just-in-Time production strategy has to adapt quickly to demand fluctuations while accommodating the uncertainties across supply chains
  • Stressed supplier health concerns demand purchase teams to re-evaluate sourcing considerations of supplier health, quality and near term continuity to sustain suppliers

Recognizing the complex supply-demand balance

Apart from the complex scenarios laid out above, supply chain management in the complex new world face multiple uncertainties:

  • Supply chain disruptions – there could be prolonged shutdowns across multiple supply hubs in the world. Also there could be restrictions of movement of parts due to travel restrictions
  • Distressed Suppliers – Many suppliers may be facing financial constraints and liquidity problems. This will force organizations to seek alternatives
  • Sourcing Concentration – Dependence on a single geographic source for supply chains and no clear strategy on mitigation measures
  • Demand Uncertainties – Volatile markets create an uncertain demand and this impacts the entire value chain of a business along with suppliers

A first step – Supply Chain Stress Assessment

So how does an organization start along the road of Supply Chain Diversification and create a network of suppliers that can thrive in the new normal?

The first step is a well orchestrated assessment that fully recognizes the in depth exposure a business has to its current supply chain:

  • Account for all inventory – in-transit, warehouses, spares, inventory buffer
  • Work with immediate suppliers to qualify risks to their suppliers
  • Build “outside in” analytics for all suppliers
  • Run supply chain stress test vs supplier balance sheet to understand vunrabilites
  • Asses whether current or future movement restrictions will disrupt the supply chain
  • Conduct scenario planning to understand how inventory buffer changes will respond to various demand scenarios
  • Task supply chain and operations teams to build multiple plans of supply versus demand and how the plans will play out

A second step – ReSeT

Tata Technologies has devised a framework for an organization to reset its supply chain strategy – ReSeT.

OEM’s need to identify immediate system Restart challenges, devise action plans to Stabilize operations in the medium term and equip themselves to Thrive in the new normal by de-risking supply chains. Business as usual “won’t” be as usaul anymore. To thrive, organizations have to adapt to the new normal

Three Horizons of ReSeT

So what are the actions required for the three horizons?

  • Accounting of Inventory: In-transit
  • Supplier-Assessment: sustained supply in near term and long term
  • Logistics capacity estimation and downstream collaboration with 3PL
  • Alternative Suppliers or distressed supplier management to meet demand
  • Movement of assets like tooling and fixtures to new suppliers
  • Leverage digital tools to enhance upstream and downstream customer collaboration
  • De-risk supply chain trough strategic expansion of local and geographic supply chain
  • Build digital and analytics capabilities for predictive monitoring and supply demand matching
  • Ensure seamless and secure communication with suppliers so that they react to changing circumstances

Tata Technologies – a trusted partner

Tata Technologies brings deep expertise in engineering services and complete digital solutions to assist business navigate through the supply chain rationalize challenges

Tata Technologies has developed a holistic set of tools for supply chain diversification – Optimized Supply Chain and Risk Assessment

  • Assessments of Supply Health, Logistics and Inventory Management
  • Supplier Monitoring, Supplier on-boarding, Demand and supply simulations
  • Supply de-risking strategies, Cost optimization, VAVE, Forecasting tools
  • Digital expertise to build robust systems

OSCAR consists of a combination of digital accelerators and industry expertise

To see how Tata Technologies can help your organization, visit our website
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