Tackling Post-pandemic Supply Chain Risks
One of the key lessons learnt from the Covid-19 pandemic is the need to enhance supply chain resiliency. While globalization of the manufacturing process has entailed benefits of lower cost of production, it has also increased the vulnerability of supply chains in case of disasters and disruptions. This has reinforced the need for risk-based assessment of the supply chain and putting in place mitigative measures to minimize production disruptions has become mandatory.
According to an Accenture report, Covid-19 caused supply chain disruptions in 94%
of Fortune 1000 companies; 75% of companies experienced negative or strongly negative impact on their businesses; and 55% of companies had to downgrade their growth outlook.
The time has come to fundamentally rethink supplier relationships. In today’s competitive and dynamic marketplace, it is imperative to build strategic relationships with your suppliers, ideally for the long-term.
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It is worth noting that though the COVID-19 pandemic is a Black Swan event that has disrupted the global economy in significant ways, it is not the only threat manufacturing companies across the spectrum face. A McKinsey report points out that while the disruption due to the pandemic, no doubt, has been at an exceptional level, some of the other factors that can affect the supply chain include:
- Climate change and natural disasters
- Macroeconomic and political factors such as trade-policy or regulatory changes
- Malicious actions such as security breaches and intellectual-property theft
- Counterparty issues such as financially fragile suppliers
The report on the research conducted by the McKinsey Global Institute (MGI) goes on to add that, on average, similar disruptions that last for more than two months occur every 3.7 years, . And, in a ten-year period, as a result of these shocks, manufacturing companies such as medical technology companies can lose up to 38 per cent of one year’s earnings.
The disruptive forces lead to a shortage of input raw materials or components, and in tightly coupled production arrangements, this can lead to limited inventory or increased complexity. And, if it is a critical input, then locating a potential substitute or implementing other mitigation strategies will become paramount.
Managing Risks in the Supply Chain
Some common supply chain issues include:
- Non-availability of the right input or component in the right place at the right time
- Movement limitations due to the restricted international transportation and imposition of border controls and export restrictions
- Sourcing from alternative suppliers that do not comply with regulatory requirements
- Varying demands across segments, leaving manufacturers under prepared
- Inventory storage challenges, compounded by shrinkages and thefts
- Decreased productivity by current supplier
- Challenges with respect to performance or project management by supplier
- Supplier quality issues
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To overcome these challenges, businesses need end-to-end visibility into their supply chain in real-time. They need a proactive approach to manage supply chain issues, identifying suppliers of critical components, identifying risks, use a scoring system to rank the risks from highest to lowest and creating mitigative measures to minimize disruptions.
The process begins right at the stage of onboarding suppliers where their capabilities need to be assessed to supply components that meet the specifications and regulatory standards. They should also be evaluated for planned and unplanned customizations. Price fluctuation can affect profitability and therefore needs to be accounted for. The absence of a proper program and performance management for suppliers can lead to dealing with suppliers who are financially unstable or are dealing with insolvency.
To ensure proper risk assessment and management, businesses need a system whereby they can:
- Monitor and track risks
- Identify the root cause of the problem and not just address the symptoms, to prevent recurrence.
- Design complementary mitigation layers for greater resilience
- Evaluate the cost-benefit of each mitigative effort
- Communicate the risk mitigation efforts with all the stakeholders
Supplier Management Solution for Proactive Risk Management
Manual methods of supplier identification, onboarding, performance tracking etc. can be ineffective. There is a critical need for a cloud-based automated solution such as the one from ComplianceQuest. Aligned with leading regulatory standards, the solution empowers businesses with visibility into the entire supply chain management process right from:
- Supplier on-boarding and collaboration: The supplier portal is a key feature in the ComplianceQuest supplier management solution that serves as a single destination for accessing supplier-specific information, data, metrics and dashboards.
- Driving Supply Chain Excellence: By automating supplier management using ComplianceQuest’s secure, cloud-based solution, fostering best practices in supplier relationships, ensuring quality, compliance and readiness becomes easier. As it is tightly coupled with audit, risk, change, document management, and other QMS capabilities, information can be easily and instantaneously shared with suppliers. This simplifies addressing issues, taking corrective actions, and monitoring performance in real time. The entire workflow is optimized for driving efficiency and cost-effectiveness
- Supplier Inspection Management: Suppliers can release their inspection data to buyers using the ComplianceQuest Supplier Management solution to receive approval and release a shipment. This ensures that buyers receive raw materials that are as per the specifications and, therefore, avoid delays in production. This approach also helps to reduce the Cost of Quality by reducing rework when returning nonconforming shipments to suppliers and the need for frequent manual incoming inspections.
- Risk Management: The solution provides the required framework to capture, triage, investigate and disposition all nonconformances in a timely and effective manner. The Nonconformance Management solution leverages a Production Part Approval Process (PPAP) that helps reduce the risk of nonconforming products and delays by managing new parts/material and change requests more efficiently. The supplier will be able to see the status of all the requested PPAPs through the Supplier Portal. The tool is designed to enable collaboration across the PPAP workflow – from submission to approval.
- CAPA: ComplianceQuest’s CAPA solution is designed to effectively manage the corrective action/preventive action process. As the supplier management system is truly integrated with an EQMS, it makes it simpler for both quality and SCM leaders to implement CAPA. Additionally, our Supplier Management Software provides buyers with a way to manage the Supplier Corrective Action Requests (SCAR) process. Alerts are issued to suppliers about downward trends so they can respond to and address issues quickly. This feature enables suppliers to quickly take the necessary corrective actions, manage risks, and prevent recurrences.
- Audits: Periodic audits of all key suppliers is absolutely essential. ComplianceQuest’s Audit Management module ensures all audit-related activities including scheduling audits, preparing for audits and documenting audit reports are automated. It also provides for a dedicated portal that consolidates all quality data made available by the company for the supplier to interact with, including relevant audit findings.
- Document Exchange: Our Supplier Management Software’s document exchange process allows users to securely share, distribute, track, and control access to latest versions of content such as product drawings, quality manuals, supplier quality agreements, Certificate of Analysis (CoA), Certificate of Compliance (CoC), sales collateral, etc. from a browser or tablet device. Suppliers are given access to the relevant content from a central location in a unified, cloud-based QHSE (EQMS + EHS) solution.
The solution also allows buyers and manufacturers to rate their suppliers and measure supplier performance on an ongoing basis. Since suppliers are evaluated in a consistent manner, supplier performance benchmarking allows suppliers to be compared with one another using various parameters such as:
- Risk level
- Audit results
- Product family
- Class of suppliers
- Region(s) where material is supplied
The solution also provides AI-driven analytics for prescribing supplier-related actions based on patterns and trends and enables Continuous Improvement (CI). AI and NLP-based solutions provide predictive intelligence to suppliers for demand forecasting, facilitating inventory management and capacity planning.
Check out our Supplier Benchmark Report to improve your supplier maturity and increase supplier quality by using the right digital tools.
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