Building a More Immune Supply Chain: Focusing on the Basics

What should organizations do when confronted by a global disruption like the pandemic?  This question was faced by many companies and private sector organizations who were faced with a sudden need for PPE and other supplies, and discovered that all supply had been shut down.  Supply chains ground to a standstill, and both large and small companies faced dire situations where work stoppages due to a lack of material spread like a domino effect to every region of the world.  Looking back with hindsight, what could have been done differently?

There are several principles to creating what I call “supply chain immunity“.  This is a theme I’ve been discussing with individuals in articles, webinars, and prior blogs.  It sounds complicated, but actually can be boiled down to a few basic issues, that have to be identified prior to a major disruption occurring.  Given the fact that we are going into lock downs and may well be shutting down again, this is a good time for organizations to think about how to make their supply chains more immune.

Develop the playbook

We are no doubt going to have more disasters and emergencies, and the current COVID crisis will likely get worse as we go into winter.   This should come as no surprise – crises always happen and we have to plan for them, due to the increased likelihood of hurricanes, floods, fires, and tornadoes (due to global warming), as well as increasing import and export closures as the politics of global trade wars continue to play out.  An important element here is to sit down and develop a playbook/process for working through these issues.  The playbook is just like a football coach’s playbook – it may not unfold exactly like you planned, but at least you have a plan that you can go back to, to stay on track, and adjust.   Immediately upon notification that something is wrong, the playbook determines who will be on the team, and how they assemble.  Once assembled, the team should get clarity on the nature of the  business problems face, each of the roles the team members play, and how they work together.  The playbook dictates the cadence of meetings, and sets expectations on what the general outcome should be.  Once initiated, the  response team is off and running.  The playbook ensures that people can’t blame the poor response to the turnover of administration, because playbook exists no matter who is in charge, and becomes the blueprint for planning and managing the crisis.

Define the problem

Change and responsiveness starts with defining a good question:  What is the problem we are trying to solve here?   In a recent meeting, a group of government executives came together on a call, and everyone had an opinion on what to do.  Someone stood up and asked this question of what the problem was that needed to be solved – and there was complete silence in the room!  Someone spoke up and said  “I think we want to do this…” which then led to a better defined problem statement, which started to lead to specific ways that different people on the team could help out.   In a crisis, people want to help and do something – but if they aren’t given clear directions, the result is people running around in circles.  The response team needs to be deliberate about framing the problem, and defining what functions should be engaged in the solution.  Be deliberate about the meeting cadence for the follow-up to ensure that everyone is doing what they committed to doing.  Don’t overthink it!  The playbook should call for the team to get set up and immediately establish a logical structure to get updates, the timing, and acknowledge the structure on what work has to be done in what timeframe.

Standardization

It is impossible to source products for a response when there is no standardization or specification!  Complexity is the enemy of quick response, so it is critical that companies seek to reduce sourcing complexity.  This doesn’t mean eliminating all options, but it is important to get to a sweet spot by reducing the variation of what supplies and services can be offered to stakeholders.   Reducing complexity allows you to buy at scale, which is often what is required to buy in larger quantities often demanded by suppliers.  It is also important to vet suppliers ahead of time, to ensure that they can in fact meet the standard/spec.  During COVID, many mask suppliers had minimum orders of 1 million masks, so it was important to standardize on a quality product. .

Understand the Tier 2 and Tier 3 Bottlenecks

When identifying suppliers for key products that are needed in an emergency, it is important to understand the source of raw material, and to mitigate supply risk at tier 1’s AND tier 2’s , to ensure that the solution makes business sense!  Logistics challenge were a big part of the problems experienced during COVID, as the bottleneck was at airports, where trucks with shipments of PPE waited 4 to 6 days to load their cargo onto planes in Shanghai, that were also backed up due to the surge in demand for air cargo to North America and Europe.   The goal is to minimize logistics spending yet get a high quality part at a good price.  To achieve this, while mitigating risk, it is important to leverage tier 1 suppliers to diversify their tier 2’s, and ensure that their tier 2’s also have a diverse set of tier 3’s, to reduce raw material risk.  This may involve establishing a global footprint and a good view of where your tier 1’s come from, and building redundancy in the supply network.  This allows you to divert production and shipments to alternative suppliers, and reduce dependency on a single source.  This is a “nuts and bolts” risk manage101 argument – yet many companies don’t conduct this level of advance planning.

Conduct a post-mortem

Once the crisis has passed – the team should conduct an after-action review.  What will we do to avoid running out of supplies in the future?  What were the areas of supply where we struggled this time around?  What are the requirements to avoid this recurring?   Build a list of those requirements, including standard specifications, with a global footprint to allow redundancy.  These questions can take the organization down  a risk mitigation plan, that will allow you to be much better prepared…. the next time another major disruption comes along..