Quarterly Catch-Up: A Dive into Supply Chain Trends

February 1, 2024

Art Koch’s Profit Chain® Tips
Welcoming in 2024
Volume 5 | Number 1 | January 2024

I’m starting a quarterly update on worldwide supply chain insights called Quarterly Catch-Up: A Dive into Supply Chain Trends. The intent is to provide you with a quarterly snapshot of supply chain pressure and critical inflationary drivers that will aid senior leadership and supply chain professionals in navigating the ever-changing challenges of the global supply chain.

Each update will start with an Executive Summary of approximately one page, allowing the reader to understand the worldwide supply chain environment at 20,000 feet.

Following the Executive Summary is an in-depth analysis of six individual indices that allow the reader to dive deeper into the driving forces for each to understand better how they could impact your business.

Let me know if there are indices you think are relevant and should be included. I’m very interested in hearing suggestions.

Click here to read the full article.

Strong Relationships and Proactive Strategies Are Key to Successful Navigation of Supply Chain Disruption

January 10, 2022

Claremont, CA
Tuesday, October 19, 2021

Oct 1, 2021

FOR IMMEDIATE RELEASE

The SAC® Release

Strong Relationships and Proactive Strategies Are Key to Successful Navigation of Supply Chain Disruption

CLAREMONT, CA— Ongoing supply chain volatility and disruption are creating major challenges for manufacturers, distributors, construction firms and retail groups. The strength of your customer and supplier partnerships is critical to successfully weathering the storm and thriving with high levels of disruption, according to The Society for the Advancement of Consulting® (SAC) Supply Chain SIG. Proactive prioritization and allocation of products and services will create customer loyalty and enable profitable growth.

The World on Backorder – How the Best Supply Chains Compete

“Globally, we are experiencing significant supply chain delays. At various points in the supply chain, organizations may be feeling material disruptions, resource constraints, and cost increases. Expect these interruptions into 2022,” says Diane L. Garcia of Lorraine Consulting, LLC, who has over 13 years’ experience in operations and supply chain management and is an expert in helping clients improve their unique business processes. Diane applies cutting edge supply chain optimization knowledge and implements best practices to manufacturing and distribution companies in North America.

“With such dramatic changes, it’s critical to align your supply chain performance to meet changing demand,” according to Garcia. “To do this, my best clients focus on building flexibility, predictability, and scalability into their supply chain processes and relationships. Lastly, with limited material availability, have a robust allocation process established across your organization. This mitigates delays to key customers.”

How Companies Navigate Disruption Will Separate Winners From Losers

“If there is one item every client has in common no matter the size or geography, it’s the increased level of supply chain material disruption,” points out Lisa Anderson, president of Claremont, CA-based LMA Consulting Group, Inc and manufacturing expert known for creating supply chain resiliency. “Material shortages. Transportation capacity constraints. Extended lead times. Rising prices. The level of disruption is extreme, and there is no end in sight. We are in a new era of transition, disruption, and volatility.

“There will be a large separation between the winners and losers following this pandemic, similarly to the period following the Great Depression,” she adds. “The companies to thrive will focus on talent, innovation, revamping their supply chain (partnership, reshoring and nearshoring will continue to increase), proactive and integrated business planning (Sales, inventory and operations planning (SIOP/ S&OP), and the digitization of the supply chain. The rest will struggle and diminish.”

The New Trifecta: Anticipate, Manage, and Maintain

“Disruption in the supply chain is the new normal,” explains Elizabeth Warren, President and CEO of Dialed-In Partners, a consulting firm that assists clients in achieving the best possible outcome for their projects. “Today’s executives and supply chain managers have to anticipate and manage disruption, while keeping operations running smoothly.

“As shortages continue to impact markets, businesses should find alternative suppliers now, not when inventory is depleted,” adds Warren. “Businesses survive by pivoting, using materials on hand, such as distilleries making hand-sanitizer, or clothing manufacturers making face masks.

“The post-pandemic business environment continues to be in a state of flux, and the need to strengthen existing supplier relationships, while simultaneously building new ones, is critical,” Warren notes. “Disruptions aren’t going away anytime soon. The key to surviving and thriving is to be flexible and pivot.”

The Fruitful Areas of Supply Chain Resilience

“Supply chain material disruptions across many sectors and global regions have been a key feature of the last eighteen months. This is due to a combination of factors including the COVID pandemic, geopolitical tensions, accidents, and natural phenomena,” remarks Dublin, Ireland-based Patrick Daly, managing director of Alba Consulting, author of the book International Supply Chain Relationships: Creating Competitive Advantage in a Globalized Economy, and host of the Interlinks podcast on globalization.

“This has provided opportunities for those businesses that have explored three aspects of their activity to change and improve—namely, their internal processes, their relationships with key supply chain partners, and innovation arising directly from the disruption and volatility of the trading environment,” points out Daly.

“If you want to look forward to a better future for your business beyond the pandemic and in a world of permanent disruption and volatility, these are the fruitful areas on which to focus to ensure ongoing resilience and adaptability,” he recommends.

Velocity Can Reduce Supply Chain Challenges

“The COVID-19 pandemic has taught organizations how to conquer any global supply chain disruption,” says Art Koch, President of Arthur Koch Management Consulting, LLC, based in Miami, FL. “As the world exits the COVID-19 pandemic, we encounter localized hot spots that disrupt supply chains.

“Diligent, insightful supply chain leaders are transforming their supply chains to be more flexible, responsive, and predictable,” Koch notes. “It’s all about increasing supply chain velocity with reduced lead-times by near-shoring, on-shoring, and in-sourcing. An additional strategy is to partner with suppliers that have dual manufacturing capabilities. These tactics give supply chains added resilience during global, regionalized, or localized disruption. Hence, greater flexibility and responsiveness.”

One Beacon of Light in the Current Chaos

“Supply Chain disruption is an opportunity to create predictability in client communication,” says Dr. Karen Wilson-Starks, President and CEO of TRANSLEADERSHIP, INC., and an executive leadership development expert based in Colorado Springs, CO.

“Companies that are open, honest, and timely in their communications garner respect and trust from their clients,” explains Wilson-Starks. “Clients know they can count on you to keep them informed, to anticipate what they need to know, and to prioritize their best interests. Whenever unavoidable changes and delays occur, proactive communication opens the door for partnership and co-creation of mutually beneficial solutions. You become a beacon of light in chaos.”

Lean is Not Dead

“Some say that lean is dead because disruptions in supply chains have shown how vulnerable lean is and that it exposes companies and supply chains to shortages,” says Antonio Zrilic, Managing Director of LOGIKO CONSULTING, based in Zagreb, Croatia, and the author of the book Six Step Inventory Optimization. “They also blame lean supply chains for material shortages, while others suggest that less rigid inventory management would in some way improve the availability.”

However, Zrilic points out, “They forget that lean should not be implemented without a heavy dose of cooperation and relationships with partners. Lean without relationships is an empty phrase.”

Vulnerability Exposes 18-Month Road to Recovery

“Global supply chains are suffering their own version of Warren Buffett’s famous saying, ‘Only when the tide goes out, do you discover who’s been swimming naked,'” says David Ogilvie of David Ogilvie Consulting a niche consulting firm based in Brisbane Australia. “COVID has exposed how vulnerable the supply chains of the world really are to disruption. It would be fair to say not enough risk management was conducted. No one really role played this type of scenario to the level that has come to pass.

“Companies need to revisit their supply chain strategy and inventory management practices in light of this disruption,” adds Ogilvie. “It will take 18 months or more to recover. This will have a large impact on cash flow as a result. A review and potentially redesign of your supply chain is the most strategic and impactful thing you can do right now.”

Deep Relationships Offset Long Lead Times

“Long lead times due to supply chain disruption are here for the foreseeable future,” said Evan Bulmer, director of EBAA in Adelaide, Australia. The author of Numbers that Matter: Learning What to Measure to Achieve Success in Your Business, Evan is the Financial Concierge for small business.

“It’s critical that businesses maintain strong and effective communication with their customers to help them through what is now a much longer and more problematic buying cycle,” explains Bulmer. “Without that input and direction, your customers are likely to get frustrated and look for alternative solutions.”

About SAC

The Society for the Advancement of Consulting (SAC) is the premier association for independent consulting professionals who subscribe to an industry code of ethics and provide significant consulting results among their clients. Founded by Million Dollar Consulting guru Alan Weiss in 2003, SAC offers a series of in-person and online programs to help consultants share best practices and learn from industry experts and thought leaders in the business world. SAC today has members in 14 countries around the world.

For more information, go to http://www.consultingsociety.com, email info@consultingsociety.com, or call (909) 563-1803.

 

Categorized in: In The News

In Crisis – America’s Industrial Leadership

September 30, 2021

Art Koch’s Profit Chain® Series
Volume 4 | Number 9 | September 2021

 

How much more commentary about the total cost of production must we listen to or read about  to realize that American industrial leaders have lost their “handle” on their organizations?

To begin with, we as consumers are getting slammed with shortages due to the effects of “mass” globalization. Too many executives in corporate leadership misread the substantial risk they were exposing their customers and businesses to by moving overseas.

For years American businesses have moved to manufacture outside North America to Asia, claiming they could not compete in our labor market. Yet, at the same time, Japanese, S. Korean, and German companies expanded their manufacturing within NA to get closer to their customers, and they are still returning respectable profits. What do they know that US leadership does not? They know how to operate cost-effective manufacturing businesses and have been doing so for years. Additionally, they have always chased American ingenuity, and now they’ve beat us at our own game. While the Japanese, S. Koreans, and Germans were building the NA market infrastructure, many US executives became complacent, fat, and lazy relying upon unsustainable Asian labor rates and currency manipulation to produce their products. The Japanese, S. Korean, and Germans utilized inexpensive and straightforward automation and process variability improvements to be cost-competitive while manufacturing in NA. They trained and developed a skilled workforce by bringing people into the equation. Their companies viewed long-term strategies instead of short-term goals as the way to appease investors, all while moving operations closer to their North American customers. In turn, they were building great businesses.

What did North American executives do? Did they recognize they we sitting in the center of the largest consumer market in the world? No, of course not!

Instead, they chose to forget everything we learned from Eli Goldratt and Dr. Deming. In the 1980s and the early 1990s, industries focused on managing bottlenecks, reducing process variability, reducing lead-time, and eliminating waste to improve operational effectiveness. Rather than digging deep into their souls and taking the tough and challenging road to transform their businesses, our executives chose to chase cheap labor supported by foreign currency manipulation and raw material tax subsidies from local governments. Now we are witnessing the perfect storm because of poor decisions made playing out every day with material shortages and inflation not seen in thirty years – a complete recipe for disaster!

The second vital observation is that Gen X and Millennials are leaving employers in record numbers. This critical data tells me that in addition to not understanding the total cost of ownership, leaders don’t even understand how critical individuals are to the success of their business.

Make no mistake about it: all businesses are people businesses. To succeed, you must attract and retain the best talent available. The goal is to build an inclusive, engaged workforce as part of the solution. Once this objective is accomplished, you will create the desired corporate culture, win loyal customers and achieve sustainable profits.

Finally, I believe that NA has a leadership crisis. Too many executives still don’t understand the total cost of ownership (TCO). I don’t hear enough discussions around how industries can build their products locally for regional customers; or how enterprises can overcome the many barriers to manufacturing locally. Too often, I hear, “We need more safety stock and inventory,” “Who in supply chain planning is responsible for all of these shortages?” and “Whose throat do I need to choke?”

I’ll let you in on a bit of a secret. Senior leadership is responsible!

Since “mass” globalization took hold of NA industries, inventory has increased on average 31%, while lead-times have increased four-fold. We’ve lost our responsiveness, flexibility, and predictability. What do you expect when we are shipping two-thirds of our supply chain 8,000 miles away?

America’s Industrial Leadership is In Crisis

September 25, 2021

How much more commentary must we listen to or read about the total cost of production to realize that American industrial leaders have lost their “handle” on their organizations?

Wuhan’s Butterfly Effect on Supply Chains

September 20, 2021

Art Koch’s Profit Chain® Tips
Volume 4 | Number 8 | August 2021

It’s rapidly approaching two years now (November 2019), when COVID-19 was circulating in the area of Wuhan, China infecting the first cluster of humans. Since the first reported outbreak of COVID-19, it’s been an incredibly crazy experience all over the world. However, that first cough or sneeze was likely the cause of the current global supply chain disruptions.

but·ter·fly ef·fect

(in chaos theory) the phenomenon whereby a minute localized change in a complex system can have large effects elsewhere.

– Oxford Dictionary

 

bull·whip ef·fect

Also known as the “Whiplash Effect,” it is an observed phenomenon in forecast-driven distribution channels. The oscillating demand magnification upstream of a supply chain is reminiscent of a cracking whip. The concept has its roots in J Forrester’s Industrial Dynamics (1961), and thus it is also known as the Forrester Effect.

– Council of Supply Chain Management Professionals

 

Many world governments instituted “stay at home” orders, lengthy home quarantines, or “lockdowns during that same period.” When these measures took effect, consumer demand patterns that were once very predictable vanished. Worldwide non-essential manufacturing stopped. Demand for PPE and essential home goods such as toilet paper, paper towels, and soup increased exponentially, while the actual use of these items had not increased to any great extent. Consumers wanted more of what they could not get. As a result, we experienced the bullwhip effect.

When every economic indicator was pointing south toward imminent recession and the pandemic was taking hold worldwide, international ocean freight companies used the opportunity to cull and scrap their fleets of inefficient vessels.

Then, the unthinkable happened. The economy does not just come to a screeching halt! We witnessed the miraculous four to six-week transformation of the supply chain “swim lanes” from perishable food products consumed by restaurants and institutions to completely different products demanded by families working from home. Large segments of the population working and schooling from home needed computers, microphones, monitors, lights, and everything associated with a comfortable and efficient place of work and study. Our supply chain professionals rose to the cry of duty and turned what could have been a disaster into a huge opportunity.

When everyone settled into homeschooling and working from home, western consumerism took hold in the form of home improvements, kitchen and bathroom renovations, artwork, painting interior walls, new floors, etc. As Zoom and Microsoft Teams took over our computer monitors, many became self-conscious, which started a fitness craze; bicycles, weights, exercise equipment, and personal watercraft demand skyrocketed. Supply chain professionals scrambled to fulfill customer demand after the once predictable demand patterns, and supply chain swim lanes were turned upside down.

As if the disruption from the COVID-19 pandemic wasn’t enough, let’s not forget about the “Great Texas Freeze” and the Suez Canal blockage of 2021. Individually, either of these events would strain some portion of a regional supply chain. However, in conjunction with COVID-19, they caused significant reverberation throughout global supply chains that are still being felt months later.

Finally, the delays of ships waiting to be unloaded have little to do with increased imports and traffic making way to cargo ports, but more with a lack of resources further upstream in the logistics process. For two decades, the United States Department of Labor projected a shortage of long-haul truck drivers, which never materialized until the COVID-19 pandemic (the same is true for the EU). Many drivers used the opportunity to reassess their desire to be home with spouses, children, and grandchildren, leaving the workforce or working short-haul routes. Additionally, the Federal Motor Carrier Safety Administration disclosed that 60,299 CDL holders have drug or alcohol violations that bar them from operating a commercial truck. What’s striking about this data is that it is nearly the same number of drivers needed to fill the current commercial driver shortfall. – Freight Waves To further complicate the situation, there is a shortage of intermodal chassis and warehouse space to store incoming goods. These constraints are a bottleneck along our domestic supply chain, and if not addressed with more drivers and chassis, will negatively impact economic growth.

Did “the sneeze heard around the world” disrupt global supply chains? Absolutely! The next time you see a butterfly effortlessly floating through the air, or you forget to cover your mouth when sneezing, remember one flap of the butterfly’s wings or errant sneeze can change the course of history!

I want to take time to recognize the supply chain professionals who are working diligently to hold the world’s economy together. I’ve made a career of helping people and organizations overcome their supply chain opportunities. I can tell you firsthand that too often, the individuals tasked with the improbable job of keeping food on our tables, hospitals stocked with supplies, and cars in our garages don’t always have the necessary resources to succeed. However, what we are witnessing with the pandemic is a testament to their grit, fortitude, and resiliency. Please accept my THANK YOU to you and your entire family for the hard work and sacrifices over the past eighteen months.

The Jiggy Jaguar Podcast

September 2, 2021

I was interviewed for The Jiggy Jaguar podcast August 26, discussing Inflation – Is It Transitory or a Longer Term Challenge?

Follow the link to listen now.

Listen to the podcast.

Categorized in: In The News

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Market Report: Delta Variant’s Impact on Global Economic Recovery

September 1, 2021

Art Koch’s Profit Chain® Market Report
Volume 1 | Number 2 | August 2021

If you missed last month’s announcement, I’m excited to announce a welcome addition to my monthly newsletter family. Last month we introduced Art Koch’s Profit Chain® Market Report (MR). The MR is presented monthly in conjunction with Deborah Brown, CEO of DDB Advisory Services. I’ve known Deborah for over fifteen years and trust that her insights will inspire you. Deborah’s prior financial background and handle on the U.S. economy as a bond trader will help guide you as you transform your organization and supply chains during these tumultuous times.

Overall, our goal is to highlight the relevant KPIs in the financial markets within the past 30-days, demonstrate how these factors impact supply chains, and recommend measures to diminish those impacts.

Art Koch – AKMC, LLC

 

When the Delta variant became the dominant strain of Covid-19 in India and the U.K. earlier this year, Americans had little idea what future impacts would be to the continental U.S. in the coming months.

According to John Hopkins University, since Jan 1 of 2021, there have been 16,578,509 cases of Covid-19 in the U.S. The latest seven-day moving average of new daily cases rose to 130,710 on Monday (Aug 16), the highest level since February and up from 13,118 at the end of June. That’s a 10-fold increase in just a month and a half! Hospitals in many states, including FL and TX, are overwhelmed with coronavirus patients and repurposing hospital wings for overflow if they are able. Often alternate facilities are overcapacity, and there is no place to transfer patients putting their lives in peril.

To combat the newest wave of infections, mask mandates and vaccination passports are becoming the standard in workplaces, business services, recreational facilities, and restaurants. Last week NYC enforced vaccine passports and mask mandates for restaurants, gyms, and other recreational facilities. Federal Government workers must wear masks and be fully vaccinated. Many private sector companies have returned to mask mandates and now require complete vaccination as a condition of employment. According to Indeed, a leading job posting website, more job postings now require vaccinations, and large corporations like McDonald’s and United Airlines are leading the charge. Several companies are delaying re-openings until next year, and many employees are hesitant to return to the office for fear of contracting the virus.

Delta Variant in the Data

In the past several weeks, we see a slowdown in the economic recovery in the economic data. Economic growth for 2021 most likely peaked in the 2nd quarter when GDP came in at an impressive 6.5% and consumer spending was up a whopping 11.8%! Traveling had come back with a vengeance in the spring as vaccinations increased and people were desperate to go anywhere. Fast forward to July, the pace of airline reservations dropped from those spring highs, and fares are lower with the newest spike of Delta variant infections. Hotels and cruise lines followed suit reflecting weaker overall demand.

Consumer confidence is a harbinger of spending activity going forward. The University of Michigan Sentiment index fell sharply to 70.2 in the first half of August, down from 81.2 in July as respondents expressed concerns about the Delta variant. That’s a drastic decline in confidence from groups of all ages, incomes, education, and regions. When consumer confidence wanes, so does consumer spending.

Small business confidence fell to its lowest level in August since early spring as rising Delta variant cases changed business owners’ expectations. According to a WSJ/Vistage Worldwide survey, only thirty-nine percent of small business owners expect economic conditions to improve over the next year, down from 50% in July and 67% in March (see graph below.)

 

Retail sales fell 1.1% in July compared to June. Ex-autos, one of the most volatile sectors, sales were down 0.4%. Retail Sales data reflects sales for 13 major types of retailers and is a good measure of inflationary pressures in the economy.

After the July Federal Reserve meeting, Fed Chair Powell publicly expressed concern about the impact of the Delta variant on the economic recovery. The Fed’s primary tasks are controlling inflation (the pace is gradually easing) and promoting a stable labor market through monetary policy. Despite the high rate of Delta variant infections, weekly jobless claims fell to a new pandemic low for the week ending August 13th, declining four weeks in a row, and are down more than 50% since January. However, let us not forget there are still 10.2 million unfilled jobs in the U.S. The Fed has signaled over the last few months that they are likely to begin tapering securities purchases (monetary stimulus) by the end of this year. Will the Delta variant continue to spread at a level that will derail those plans?

As a trader for many years, I was trained to see the downside of things. However, there is a new upside in the Delta variant picture. All Covid-19 vaccinations have been available through Federal emergency status; the vaccines were not FDA approved. Today the Pfizer vaccine received full FDA approval.  Moderna and J & J will follow suit within a short period. Employers who have been hesitant to require vaccines may now feel that they are on higher moral ground and mandate vaccinations for their employees. Hopefully, individuals waiting for official FDA approval to get vaccinated will take the plunge and get the shot. Not everyone will get vaccinated, but let’s hope this approval and the ones to follow raises the number of new vaccinations significantly enough to get the virus under control.

KPI’s of Interest

United States ISM Purchasing Managers Index (PMI)

https://tradingeconomics.com/united-states/business-confidence

United States Consumer Price Index (CPI)

https://tradingeconomics.com/united-states/consumer-spending

Sources: Wall Street Journal, U.S. Bureau of Labor Statistics, CNBC, Fox Business News, MarketWatch, Econbrowser.com, New.metal.com, CNN.com, John Hopkins University, Tradingeconomics.com, cmegroup.com

 Deborah Brown – C.E.O. DDB Advisory Services

 

Impact on Supply Chains

The United States and other advanced economies have been vigilant in getting 50% and 40%, respectively, of their populations vaccinated. This vaccination diligence has paid off in the form of robust economic recovery. The recovery was also made possible through gradually improving supply chains worldwide. Recent research is validating my observations with my clients. Across several industrial sectors, I am hearing that the rate of price increases is declining, material availability has improved, fewer employees are leaving, and they can fill more vacant positions.

The concern is that most of our supply chains are reliant on emerging market economies. These economies lag behind the US and other advanced economies in vaccination penetration, with an average of 20% of their populations vaccinated. Because of the low vaccination rates, the COVID-19 Delta variant is wreaking economic havoc, requiring more lockdowns and social distancing. These measures have a direct effect by closing factories, logistic networks, and ports. Our supply chains will likely suffer if emerging economies are unable to reverse their vaccination deficiencies.

I’m not suggesting we will fall off a cliff.  However, recovery to supply chains will be three steps forward, with one or two steps backward for the next fifteen to eighteen months.

Art Koch – AKMC, LLC

 

Wuhan’s Butterfly Effect on Supply Chains

August 31, 2021

It’s quickly approaching two years, November 2019, when the COVID-19 was circulating in the area of Wuhan, China infecting the first cluster of humans. Since the first reported outbreak of COVID-19, a lot has happed around the world. However, that first cough or sneeze is likely the cause of the current global supply chain disruptions.

but·ter·fly ef·fect (in chaos theory) the phenomenon whereby a minute localized change in a complex system can have large effects elsewhere. – Oxford Dictionary

Art Koch’s Profit Chain® Market Report – The Delta Variant’s Impact on Global Economic Recovery

August 27, 2021

By the spring of this year, Americans were optimistic about returning to everyday life after more than a year of shutdowns from the Covid-19 pandemic. Instead, the Covid-19 virus threw us a curve mutating into a more virulent but less deadly Delta variant.

Avoiding Supply Chain Disruptions

August 26, 2021

Art Koch’s Profit Chain® Series
Volume 4 | Number 7 | August 2021

A colleague of mine recently joined a new company as their CEO. During the first few weeks on the job, she performed due diligence on the current situation. She quickly realized the severity of disruptions engulfing worldwide supply chains and the potential negative impact on the company’s profits.
Leaders from critical areas of the company arranged a strategy session following discussions with the CEO. The meeting comprised finance, human resources, engineering, quality assurance, manufacturing, and of course, team members from supply chain management.

The title of the meeting invitation was “Supply Chain Disruptions.” During introductions, I could sense feelings of frustration from meeting participants.
The first challenge was to get every team member to accept that the supply chain is not just one department. A resilient supply chain results from an entire enterprise’s efforts to improve responsiveness, flexibility, and predictability to customers.

The second challenge was to address team members from supply chain management suffering defeatism. Unfortunately, prior leadership had not listened to the VP of Supply Chain’s concerns regarding the risk associated with a far-reaching supply base, current staffing skills, and supply chain process ownership. However, once we dove into a brainstorming exercise and identified stretch yet realistic opportunities, most team members’ attitudes shifted to a more positive stance. They realized, “Yes, we can accomplish this!”

Most importantly, the brainstorming session “zeroed in” on lead-time as one of the most significant contributors to responsiveness, flexibility, and predictability.

The number one action that must be taken to avoid supply chain disruptions is to reduce lead time.

We then dove deeper into the factors that affect lead time. Procurement can reduce lead times by initiating the following measures:

  1. Ask and challenge suppliers on their current lead times.
  2. If suppliers are delivering quicker than system lead times, reduce lead times accordingly.
  3. If a part is commercially available, using a distributor typically reduces the total cost of ownership, including lead time.
  4. Give suppliers an extended range forecast of six, nine, or twelve months of demand, which helps them plan their business going forward.
  5. Implement raw material, work-in-process, and finished goods authorizations with suppliers. This methodology, when applied effectively, reduces total inventory purchasing exposure, pipeline inventory and shrinks lead times so that they can become as short as transit time.

The first four of these area initiatives are relatively simple to implement. It only takes leadership support, initiative, and perseverance. Keep in mind many small and medium incremental wins will amount to significant long-term success. The fifth directive is a little more challenging to implement. However, when combined with distribution solutions and twelve-month forecast horizons, they will transform your supply chain into a much more responsive, flexible, and predictable competitive advantage. After completing the brainstorming exercise, I would like to add that the procurement team’s body language and facial expressions turned positive as they could finally “wrap their heads” around the tasks and goals at hand!

Next, we uncovered opportunities to reduce the lead time within operations by resourcing, nearshoring, reshoring, or insourcing the supply chain. Initially, several team members believed that 100% of the company’s issues pertained to supply chain management until we identified factors that contribute to determining lead times from each discipline. After just a few minutes, the group came to understand that this was a comprehensive enterprise challenge.

Procurement, Quality Assurance, and Supplier Quality Engineering identified commodities that could be easily resourced. Engineering, Supplier Quality Engineering, Manufacturing Operations, and Human Resources identified several product families that could be insourced.

Senior leadership became responsible for implementing critical action plan elements, milestone dates, and status update cadence.

During one brainstorming session, the team achieved a sense of urgency and organizational focus on:

  1. Reducing and eliminating supply chain disruptions.
  2. The realization that by not working together as an enterprise, we leave ourselves vulnerable to competition.
  3. A consensus that anything can be achieved when harnessing the entire organization’s skills, focus, and sense of urgency.
  4. Reducing lead times and supplier disruptions improves responsiveness, flexibility, and predictability to customers.