Over the past few years, global supply chain issues have really come into sharp focus. After years of relentlessly offshoring manufacturing to lower-cost locales, companies have realized that “lean” can also mean brittle. As bottlenecks and single points of failure have caused chaos on the global economic front, operational excellence takes on an attitude of operational resilience. Today, it’s widely accepted that a balanced onshoring, nearshoring and offshoring strategy makes for a stronger value chain.
The need for a balanced approach applies throughout the product lifecycle, whether sourcing rare materials, procuring run-of-the-mill parts or setting the stage for repair services after the sale. Altogether, materials, components and finished goods may cross dozens of international borders before finding their way to end customers — and many more after the initial sale.
At every stage, companies focused on supply chain resilience are building relationships with those whose strengths complement their own, and they’re developing alternatives and redundancies that give them a solid Plan B when supply chain disruptions are imminent.
“Reglobalizing” to Increase Supply Chain Agility and Flexibility
Given the sheer number of things that can go wrong in a globally interconnected world, network diversification is a smart strategy. After all, it’s not like global supply chain disruptions are rare. The pandemic took many by surprise, but tariffs, geopolitical unrest, talent shortages, weather-related delays, shipping snafus and ethical issues are par for the course.
More than 73% of companies have added or removed production locations from their supply chain networks in the past two years, primarily to build risk tolerance and enhance performance. Gartner calls it a “reglobalization” strategy that increases resilience, agility and flexibility. In fact, those three imperatives have displaced cost efficiency as the top drivers of supply network changes. About half of the respondents to Gartner’s survey added new supply locations with existing partners or pursued new locations with new partners to improve diversification and mitigate geopolitical pressures.
Procurement and Inventory Practices That Improve Resiliency
When production looms, procurement and inventory management take center stage. The right parts must be on hand at the right time, and in the right place, to ensure manufacturing happens seamlessly. However, the just-in-time inventory practices that defined the pre-pandemic world have given way to a more nuanced approach meant to buffer disruptions.
Balancing nearshoring and low-cost diversification — a key aspect of reglobalization — creates a more resilient supply chain by establishing sourcing partnerships close to key markets, minimizing reliance on a single partner or region and improving collaboration among those whose economic fates intertwine. Ultimately, global supply chains are going to continue to be challenged, and one way to address this is through a consolidated, local inventory strategy that leverages an optimized delivery model for both finished and refurbished goods.
The needle has clearly moved in favor of approaches that help original equipment manufacturers (OEMs) maintain operational continuity versus those focused solely on cutting costs. Of course, the perfect and the practical must still be in harmony to avoid the fiscal pitfalls of overabundance and scarcity alike. To that end, those in search of better supply chain resilience should consider:
- Buffer inventory that enables companies to weather global supply chain disruptions without breaking the bank
- Market fluctuations that can destabilize the best-laid plans when rising orders threaten stockouts and cooling demand raises the specter of excess inventory
- Lead times for critical materials, parts or components that could halt production, which already costs Fortune Global 500 companies $1.5 trillion in unplanned downtime losses
- Agile processes that enable companies to turn on a dime when impending supply chain disruptions are identified
- Customer management practices that take into account inventory flow destabilization
Building resilience in an uncertain world requires technology OEMs to continually assess and adjust their global supply chains to guard against disruption and prepare for the future. They must make well-informed decisions that don’t shy away from the realities of risk lurking in every corner.
What Can OEMs Do When Supply Chain Disruption is Imminent?
In part, resiliency is about understanding where to concentrate one’s attention and resources when disruption threatens business viability. In such instances, Gartner suggests that global supply chain strategies should focus on immediate concerns and place long-term planning on the shoulders of product design (e.g., building in sustainability and circular economy practices). Doing so takes care of immediate issues while safeguarding the organization from similar problems in the future.
Supply chain risk management (SCRM) methodologies help technology OEMs:
- Identify internal, external and third-party risks
- Define risk thresholds for various supply chain and procurement activities
- Build vital recovery capabilities into their repertoire
If technology OEMs and their partners have done their due diligence and adequately prepared their supply chains for potential misfortune and malfeasance, cool heads should prevail when disruption threatens the business. To counteract supply instability, focus on immediate concerns that improve product availability:
- Redirecting customer orders to available products or sources less at risk
- Identifying alternative materials, parts and components to fulfill production needs
- Leveraging business relationships to overcome shortages and barriers
- Take advantage of sustainability operations — such as repair and harvesting — to secure spare parts
6 Capabilities to Look for in an Outsourced Supply Chain Management Partner
Technology OEMs tend to focus on research and development, not inventory and supply chain management. But that doesn’t make those capabilities any less important. Rather, what it does make them is ripe for outsourcing, which means a trusted partner is essential.
In an uncertain world, here are six capabilities to look for in a global supply chain partner:
- Resilient supply chain practices that balance risk proactively and cost-effectively to guard against potential disruptions
- A robust supplier network with relationships and redundancies across the full complement of parts needed for production
- Regional and local facilities in close proximity to customers to minimize downtime
- Technical, inventory and supply chain experts available around the clock to support customers across time zones
- Expertise in federal, state and local laws governing materials, parts and components — tariffs included
- Flexibility and scalability to support in-region or in-country manufacturing and sourcing mandates as government priorities shift
It’s Time to Reengineer Your Global Supply Chain for Resilience
Technology OEMs are investing in a variety of strategies to increase global supply chain resilience, from reglobalization and critical inventory stockpiling to alternative materials, suppliers and manufacturing locations. Resilient supply chains that factor in fault tolerance are typically far better prepared to withstand procurement and distribution disruptions and help avert associated costs.
An outsourced services partner like Shyft Global Services marries expertise and experience with global supply chain relationships and superior inventory management to ensure optimal quality and support even in the most challenging circumstances.
In the whitepaper “Reengineering Your Supply Chain,” discover how expert supply chain and inventory management services can help you recalibrate your supply chain to increase resiliency and lower risk.
About the Author
Jay Fraze serves as Senior Director of Supply Chain Management Services for Shyft Global Services, overseeing the strategic direction and execution of Shyft’s supply chain management operations. He brings 40+ years of distribution experience and has been with the company since 1993, including 25+ years in sales, bringing extensive company and industry expertise to his current role. Jay focuses on the overall success and profitability of our supply chain management programs by optimizing operational efficiency and ensuring seamless logistics across our global supply chain network.
