Manufacturers wish they left supply chain shortages behind after the pandemic, but they remain top of mind. Concerns remain. According to KPMG, “71% of global companies highlight raw material costs as their number one supply chain threat for 2023.” And the trend isn’t ceasing. According to a survey by LeanDNA and Wakefield Research, supply chain shortages remain a leading concern for manufacturers as they look to the future.”

In fact, if you look at the pharmaceutical industry, shortages have been creating havoc. For example, there have been shortages of over-the-counter drugs and prescription medications for ADHD, cancer and diabetes have been widespread. There has been commentary about a spike in demand, but there are also comments about manufacturing delays. Of course, this is before we discuss the state of logistics disruption.

In addition to product, material and healthcare shortages, clients are experiencing a severe shortage of high-skilled talent and are struggling to upgrade ERP systems and related technologies. These issues are aggravating the shortage situation as multiple clients have the lack of system support creating further shortages and work stoppage in addition to frustrating their employees.

It is simply creating havoc as people jump into jobs they are not prepared to execute, and Executives are struggling to understand why their resources no longer seem to have the expertise they used to have. Worse yet, if they don’t realize this is occurring, the situation gets worse as employees make poor decisions and struggle to keep up. Refer to our article, Where the Talent Has Gone & Strategies for Success.

Strategies for Success

Customers will not suffer endlessly as shortages persist. They will find alternative sources of supply, source from different regions of the world, find backup sources, search for suppliers that can provide visibility and status of the end-to-end supply chain and invest in reshoring, nearshoring, and expanding regional manufacturing footprints.

Thus, proactive executives are getting ahead of these challenges. We have no doubt that the companies that can supply critical items in the next several years with uninterrupted supply will lead their industries for decades to come. What are some of the best practice strategies being deployed?

1. Go back to the basics: It is simply surprising how many clients are running into problems with the fundamentals. Who knew a best practice was to return to basics! According to a leading authority on the subject of generational diversity in the workplace, the younger generations is struggling with ambiguity and decision making. This has proven to be “on the mark” as clients have employees stuck and struggling as they don’t know why the computer is spitting out answers that are wrong and what to do about it. Thus, we are jumping in to define processes, educate on concepts and help clients over this unexpected bottleneck. Perform a supply chain assessment to quickly size up where to focus. Take our complimentary supply chain assessment quiz.
2. Planning best practices: There is no doubt that production planning, materials management, replenishment planning, and each planning expertise is in limited supply yet is cornerstone to mitigating shortages and getting in front of demand. Refer to recent examples of how this topic can make or break success in our recent article.
3. SIOP (Sales Inventory Operations Planning): One of the single best strategies to get in front of changing conditions and ensure profitable growth is to rollout a SIOP process. A SIOP process will align Sales with Operations, demand with supply, and, most importantly, it will provide a proactive view into changing circumstances with recommended solution options, impacts on product and customer profitability, heads up to capacity bottlenecks, and sales funnel changes. Read our book, SIOP: Creating Predictable Revenue and EBITDA Growth.
4. ERP, advanced technologies & automation: No client will succeed with manual spreadsheets long-term. The most successful clients are better utilizing their ERP systems to provide enhanced visibility, flexibility, and service while also pursuing advanced technologies (digital twins, artificial intelligence, IoT, robotics, meta) and automation to improve efficiencies, reduce errors, and increase scalability and profitability.
5. Innovation: Continuous improvement is no longer enough. Only those companies that innovate and turn 1+1 into 22 with collaborative partnerships will succeed.
6. Trends & Metrics: Although it is essential to review progress and results by tracking key performance indicators like OTIF (on-time-in-full), production output, and inventory turns, it is even more important to be focused on “where the puck is going” (not where it has been). Tracking trends, listening to diverse perspectives, researching and trialing new and potential trends is the focus of our most successful clients.
7. Regional manufacturing: Although this topic should arise through your SIOP process, our money is on regional manufacturing. Clients must take control over their ability to service customers. Reshoring, nearshoring, expanding manufacturing and collaborative partnerships are hot topics. For example, even industries such as medical device, pharmaceutical, and computer chips are joining aerospace, food & beverage, industrial equipment, and building products to produce close to customers.
8. Talent: We’d be remiss not to mention that talent will “win” in the end. Attract, hoard, develop, train, and mentor talent!

Shortages are persisting. Geopolitical tensions remain high. Critical supplies such as computer chips, medical supplies, and aerospace and defense products are providing evidence that it isn’t just a lack of “nice-to-have” items. Pursue strategies to ensure you are ahead of the curve, and your business will thrive.

If you are interested in reading more on this topic:
Why Manufacturing Matters and Will Thrive in the Next Decade

The post Supply Chain Shortages Remain a Concern: Strategies for Success appeared first on LMA-Consulting Group, a supply chain consulting firm.

CLAREMONT, CALIFORNIA – February 26, 2024 –  Lisa Anderson, Lisa Anderson, MBA, CSCP, CLTD, President of LMA Consulting Group Inc., a leader in supply chain optimization and transformation, has recently launched the innovative Supply Chain Profitability Assessment. This cutting-edge tool prompts supply chain professionals, operations executives and senior leaders to introspect and critically assess various facets of their supply chains that affect customer performance, with a focus on flexibility and efficiency.

Participants respond to targeted yes/no questions, encouraging them to reflect on their current practices and identify potential areas for enhancement. The assessment covers critical factors such as order fulfillment tracking, production data accuracy, on-time delivery rates and inventory level forecasting,

“In today’s volatile supply chain environment, it’s crucial for professionals to focus on agility and thinking ahead strategically. Customers have high expectations. Keeping the supply chain optimized and agile can meet and even exceed expectations, resulting in continued profitability,” commented Ms. Anderson. “Even high-performing supply chains have room for improvement. The key is planning, communication and establishing contingencies to mitigate long-term effects of disruptions.”

The Supply Chain Profitability Assessment is built on LMA Consulting’s extensive experience in helping businesses navigate and thrive amidst supply chain disruptions and growth. It is an invitation for professionals to critically evaluate their supply chain operations and identify opportunities for strategic improvement.

LMA Consulting invites supply chain professionals to take the Supply Chain Profitability Assessment and embark on a journey toward optimized supply chain excellence. To take the Assessment, click this link. The tool serves as a gateway to transforming supply chain operations, ensuring they are maximized for efficiency and profitability.

LMA Consulting specializes in guiding businesses through turbulent times with strategic formulation, comprehensive supply chain transformation and resilience-building solutions. For more insights, download Ms. Anderson’s eBook, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., specializing in manufacturing strategy and end-to-end supply chain transformation.  A recognized supply chain thought leader, Ms. Anderson has been named a Top 40 B2B Tech Influencer by arketi group, a Top 16 ERP Expert to Follow by Washington-Frank, among the Top 10 Women in Supply Chain by Warner PR, in the top 55 Supply Chain & Logistics Experts by flexport, and a woman leader in Supply Chain by RateLinx.  Her primer, “I’ve Been Thinking.” offers strategies for creating bold customer promises and profits. An expert on the SIOP process, advancing innovation and enhancing supply chain resilience, Ms. Anderson is regularly interviewed and quoted by leading publications. For information, sign up for her Profit Through People® Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.                 
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Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com

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Clients typically set goals; however, goals without an understanding of where you stand is non-value added. Although it is common to set goals and expect employees to achieve them, it is far less common for clients to understand how they will get from the current state to the desired future state. You must start by understanding where you stand in your supply chain. Unfortunately, although this sounds obvious (and Executives would agree), in reality, it is uncommon common sense!

How comfortable are you that you understand where you stand when it comes to your supply chain? We thought it would be of value to create a quick (2 minute) supply chain assessment quiz so that you can self-assess your supply chain. Learn more about the quiz here.

Client Example: Supply Chain Assessment for Service Turnaround

Our first step of any project is to perform a rapid supply chain assessment. For LMA to help a client, we must know the current situation. We do a review of people, processes, systems (ERP and peripheral systems such as CRM, CPQ, etc.), data, alignment with strategy, etc. Since we are focused on bottom line results, we must determine how to get from “here” to “there” on the quickest and smartest path while ensuring quick wins and value along the way.

For example, an aerospace manufacturer wanted to improve delivery performance to support key customer programs (Boeing, Gulfstream, etc.). In essence, they wanted to dramatically increase OTIF (on-time-in-full) from the mid 60%’s rapidly and reduce lead times to a more acceptable and attractive level for customers while maintaining or improving costs and working capital levels. The executives brought us in as supply chain consultants to upgrade their systems, processes, and talent to achieve these goals.

Our first priority was to perform a supply chain assessment. We reviewed their end-to-end order flow process, use of ERP, data, and skills/ talent. This provided us with a good understanding of their strengths, weaknesses, opportunities, and risks of execution so that we could put together a roadmap for success.

We stuck around and partnered with our client to roll out demand planning, master scheduling, capacity planning, and SIOP (Sales Inventory Operations Planning), also known as S&OP programs. Based on the assessment, we knew we could better utilize their ERP system and upgrade processes by entering forecasts, analyzing capacity plans and establishing supplier contracts with attractive pricing and stability. Additionally, we identified training and education opportunities and risks of execution so that we could mitigate potential bottlenecks. We brought service levels into the 90%’s, gained key customer confidence with improved scorecard performance, and improved margins by several points by rolling out materials forecasts, supplier contracts, and by gaining long-term visibility into operational capacity to minimize costs.

Client Example: Supply Chain Assessment to Turnaround an ERP Debacle

In an electrical equipment manufacturer, customers were upset due to lagging service levels and key employees were overwhelmed with an insurmountable workload following the launch of a new ERP system. After jumping into the details to work with their North American planners to unbury the schedule and to develop directional capacity information, we performed a supply chain assessment with an eye to use of ERP. There was no way to find a grain of sand in the ocean of details without assessing their supply chain and use of ERP.

Although we have a combined 99+ years of experience, 112+ successful client engagements with bottom line business results, 42+ ERP projects, and specialized manufacturing experience, jumping into the process and working with the key resources to turn around the execution didn’t provide enough information to put together a long-term path forward that would achieve the radical improvement required with the ERP system. Thus, an assessment was required with the full scope of ERP as it relates to supply chain and order creation and fulfillment.

We spent five weeks in an around-the-clock focused effort as the situation was urgent to gain a thorough perspective of the business processes, use of ERP and associated skills. After all, our team had to absorb what the ERP implementation team took a year to develop and roll out while understanding the impacts on the supply chain teams (demand planning, production planning, materials planning, capacity planning, etc.) and the correlation to the business bottlenecks. We reviewed business requirements, ERP functionality, offline spreadsheet processes, the status of data integrity, data availability, the status of training and development, availability of key resources, etc. Although it was a hair-raising process, we were successful in putting together an assessment, resource recommendations, quick wins and long-term solution to rectify the use of the ERP system to drive the business results.

The Bottom Line

Take a step back and assess what is needed to achieve your objectives. Don’t “stay in your lane” if you require a broader scope to ensure results even if you must have uncomfortable conversations and take risks in pushing back on standard assumptions. On the other hand, don’t fall into analysis paralysis. When you have a directional view that is assured to get you moving in the “right” direction (even if not 100% optimal), start moving. Avoid circular discussions and pivot back to the key points.

Also consider the people, the process, the system, the data, metrics and strategy in conjunction with each other. Focusing on technical without the process and people will not work, but focusing on the people without a good understanding of the technical and process aspects will not work either. In fact, you will come to inaccurate conclusions in your assessment that will make the situation worse, not better. Instead, use uncommon common sense, and you success rate will skyrocket.

If you are interested in reading more on this topic:
Why Planning is Impacted as Disruptions Abound

The post How Do You Rate in Supply Chain? appeared first on LMA-Consulting Group, a supply chain consulting firm.

The White House has launched a cabinet-level supply chain council as the criticality of the topic rises to the top. Although they emphasized the minimization of supply chain disruptions as it relates to inflation, our perspective is that the supply chain is much bigger than that. From national security to securing supply chains of the future, there is tremendous work that industry must take on at a dramatically accelerated pace for companies that want to thrive 5 to 10 years from now.

Why Supply chain Resilience Matters

China is the largest manufacturer of the world and there are many risks rising to the top. For example, China is quietly working on several fronts:

• Supporting Russia and Iran behind-the-scenes (buying up oil etc.)
• Threatening Taiwan (which produces 90% of the advanced computer chips in the world)
• Threatening goods movement in the South China Seas (risking shipments to/from Asia)
• Buying up and/or taking control of farmland, critical minerals, ports/ terminals (including control of the Panama Canal), and other infrastructure around the world
• While the US has decreased carbon emissions by 20% since the peak, China is expected to be at an all-time high in 2023. They permitted 2 coal plants per week in 2022.

There are other risks throughout the world. Look no further than the Russia-Ukraine war, the Israel-Hamas war, etc. Each of these events impact the supply chain. In addition, there are the many disruptions carrying on since the pandemic caused by a variety of factors including lack of resources (labor, materials), weather, strikes, etc. The baby boomers are retiring at a quick pace, creating a shortage of resources we haven’t seen in our memories.

Thus, supply chain resilience has become of paramount importance.

Supply Chain Resilience Path Forward

Unfortunately, there is no 5-step plan to check off to create a resilient supply chain. The bottom line is that it requires confronting reality, uncommon common sense, execution of process disciplines, innovation, and a willingness to take smart risks and invest wisely.

Our proactive clients are jumping on creating a resilient supply chain. In no special order, they are following several of the following strategies:

• Rapid assessment: It helps to know where you are starting (strengths, weaknesses, risks, priorities) so that you can focus efforts rapidly. Learn more about LMA’s complimentary supply chain assessment. 
• Reshoring: Getting manufacturing under better control
• Nearshoring/ Friend shoring: Bringing manufacturing closer to consumers/ customers to minimize disruptions and lengthy transit times.
• Backup sources of supply: Pursuing multiple backup sources of supply to cover for unexpected issues.
• Securing funding to support resiliency and growth: Investments are required (technology, people, infrastructure) to create supply chain resiliency.
• Implementing technology to support resiliency: Smart executives are upgrading ERP and related technologies (IoT, AI, CRM, customer/supplier portals, business intelligence, etc.) to increase visibility, automate mundane tasks, and upgrade the customer experience.
• Cross-training internal & external: In addition to cross-training resources to backfill key roles, smart executives are supplementing resources with consultants, collaborating with supply chain partners, and finding creative solutions to ensure customer service and profitable growth during volatile times.
• Moving from vendors to partners: Vendors will not be there when you need them. Vendors implies price. Upgrading to suppliers is a step in the right direction; however, during the risk laden times, partners are needed.
• SIOP (Sales Inventory Operations Planning): Upgrade your demand and supply planning to get in front of what’s needed to create a resilient supply chain with a SIOP process. Learn about SIOP, also known as S&OP, and read our recent article on moving manufacturing forward instead of backwards with SIOP.

The Bottom Line

There are many more strategies you should pursue to ensure supply chain resiliency. Start with a rapid assessment while jumping on at least one strategy that supports your company objectives. Don’t just add a program and assign your already limited resources to another priority. Instead, do the hard work to determine what will make a difference and focus your resources.

If you are interested in reading more on this topic:
A Resilient Supply Chain Built for Competitive Advantage

The post Supply Chain Resilience Has Risen to the Top with the White House Council appeared first on LMA-Consulting Group, a supply chain consulting firm.

The Panama Canal has a 40% market share for containers moving goods from Northeast Asia to the U.S. East Coast, and drought conditions are creating a new round of supply chain disruptions. There have been between 130 – 160 ships waiting, leading to supply chain delays. Supply chain risk is extreme in the global supply chain. This is simply the latest issue impacting supply chains.

Due to a lack of rainfall, the Panama Canal has reduced the number of container ships to pass through on a daily basis by 20% (from 40 to 32). Additionally, it has put restrictions on the maximum ship draft to 44 feet (vs. around 50 feet previously). The trip through the Panama Canal takes 8-10 hours. If you have to find an alternate route, it adds 8000 miles.

Luckily, many companies started to diversify their supply chain with the pandemic, and they moved from just-in-time (JIT) to just-in-case inventory, and so disruptions have been muted thus far. However, as time goes on, the supply chain impacts are increasing. Costs are escalating with surcharges of up to $300-500/ container as not uncommon.

Smart Executives Responding with Supply Chain Optimization

Smart, forward-thinking executives are responding with supply chain network optimization and risk mitigation strategies. For example:

• Alternate routes: Forward-thinking executives are finding and using alternate routes. You never know when an issue will arise, and you cannot afford to wait for the crisis to occur to use your backup plan. Thus, smart executives are using alternate routes for at least a minimum percentage of shipments so that they establish their presence. Depending on your beginning and ending point, there might be several alternatives with varying levels of benefit/ cost.
• Alternate modes of transportation: This strategy will certainly cause hefty price increases, and so it is used as a last resort. However, it makes sense to establish these options.
• Reshoring & expanding manufacturing capabilities: Several clients are planning for a resurgence of manufacturing closer to customers and ramping up in the U.S. By virtue of this strategy, shipping lanes will change and diminish.
• Nearshoring/ Friendshoring: Many clients are also searching for manufacturing capabilities closer to customers, not in the U.S. or Europe. For example, MedTech is nearshoring to Mexico, Costa Rica, and the Dominican Republic. it is critical to ensure you find a friendly country to mitigate supply chain risks.
• Forward positioning of WIP inventory: Depending on your products and customer requirements, you could change your manufacturing process to produce and ship work-in-process (WIP) so that it can be turned into multiple products based on customer need and/or it can be stored at a lower cost while mitigating risk. This concept can be called mass customization, configure to order (CTO), assemble to order, and other names. The product can be redesigned to apply this strategy in some situations.
• Distribution network design: Your distribution network can be redesigned to mitigate risk while accounting for customer requirements and cost concerns.
• Right-size inventory levels: Although moving from just-in-time (JIT) to just-in-case isn’t necessarily the best plan for profitable growth and happy customers, reevaluating your replenishment planning strategies can make good sense. By resetting your planning processes, ERP / MRP settings, and kanban strategies, you can store more of the high risk inventory while storing less of unnecessary inventory to achieve a win-win outcome. To learn more about how to right-size inventory, read our recent article.

These are a few options. The key is to reevaluate your supply chain and optimize your supply chain design and network strategy.

Deep Dive into Supply Chain Risk

The Panama Canal might seem like an ideal solution, and there is significant investment going into upgrades over the next few years. However, have you performed a deep dive risk analysis? It turns out that China can control the Panama Canal even though the U.S. built the Panama Canal and gave control to Panama.

According to the Hay-Bunau-Varilla Treaty of 1903, the United States gained a 10-mile wide strip of land for the canal and provided a one-time $10 million payment to Panama in addition to an annual annuity of $250,000. However, in 1978, the President Jimmy Carter and Panamanian dictator Omar Torrijos signed a treaty agreeing to transfer control of the Panama Canal from the United States to Panama at the end of the 20th century. Panama earns around $3 billion in revenue annually.

China in essence ‘owns’ the Panama Canal since Hutchison Ports controls both ends of the Panama Canal with a terminal at each end. If China gets into a war or conflict with the U.S. or Japan (as the top 3 users of the Panama Canal are U.S., Japan, and China), they could cut off access to both ends of the Panama Canal. Which other ports does Hutchison own? If you are concerned about supply chain risk, you better find out.

The Bottom Line

A key part of a SIOP (Sales Inventory Operations Planning) process, also known as S&OP relates to proactively evaluating supply chain risk as part of your supply chain optimization strategies. Learn more about why a SIOP process should be a key part of ensuring the successful execution of your company’s strategy and the best practices for designing and implementing in our book, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth.

These types of disruptions and inflationary pressures will not stop in the current volatile and uncertain global environment. Thus, be proactive and forward-thinking in your supply chain optimization and risk mitigation strategies. At a minimum, perform an assessment of your current state supply chain and begin with the top priorities for improvement. Learn more about LMA’s complimentary supply chain assessment.

Please contact us with your stories, issues, and ideas on how issues like the Panama Canal impact your company and end-to-end supply chain. And, please keep us in the loop of your situation and how we can help your organization with supply chain optimization, risk mitigation and supporting SIOP programs.

P.S. To get ahead of the curve on where to focus for the best results to build on your foundation to get ahead of the competition, download our complimentary report, and The Road Ahead: Business, Supply Chain & the World Order.

The post Panama Canal Drought Accelerating Supply Chain Optimization appeared first on LMA-Consulting Group, a supply chain consulting firm.

Supply chain risks are exploding. Just look at the news, and you’ll see a potential UPS strike, a Canadian port strike, potential hurricanes (Hawaii, Florida), China stirring up potential conflict with China, the Crimean bridge attack, and much more. Any one of these issues could have a detrimental impact on the economy and could put a business in the wake of the issue out of business. Clients must prioritize preparation and prevention of significant risks.

For example, when I was VP of Product Supply for a mid-market manufacturer, our largest production facility (70% of the volume) was located in an area that could flood due to hurricanes. The Board of Directors wasn’t happy about purchasing excess stock year after year in preparation for hurricane season although we made a good case for it and continued to prepare. It used cash that couldn’t be invested elsewhere.

One year, a hurricane arrived that completely flooded the area. The cars were under water at the airport and no one could get to work, let alone trucks arrive with materials or leave with shipments to customers. The products were used in hospitals and nursing homes and so lengthy delays were not acceptable. Luckily, the builders of the plant had the foresight to build on a hill so that it was one of the only buildings in the area not affected; however, employees could not get to and from work.

The backup plant went into overdrive with production although it couldn’t produce everything that the main facility could produce. Because prevention and preparation were a priority, as soon as the roads were passable, trucks could pick up the excess stock and production could start full force because raw materials were already on hand. Thus, we were able to supply our customers with seamless customer service.

Unfortunately, most clients and colleagues are not in this position. They must prioritize preparation and prevention.

Preparation & Prevention Priorities

Preparing in advance will be far less expensive than waiting to respond once the issue occurred with contingent action. Once the hurricane arrived, no suppliers could get through with raw materials. Even if they could, they would have multiple priorities for businesses impacted by the hurricane. Most likely, we would have ended up on a waiting list. The best case scenario is that we would have to pay expedite fees if we could gain priority, and we would have waited a week to several months to get the required materials. Worse than that, our customer service would have suffered and we might have lost customers.

In today’s supply chain, the risks are much higher and voluminous, Thus, instead of suffering these unacceptable consequences, executives must prepare.

• Safety stock: Safety stock of key items or at certain times of the year (such as hurricane season) or for key customers make sense.
• Treat key suppliers as partners: Suppliers are not going to come through for you if you treat them as a vendor. Instead treat them as partners so that they will come through for you when these risks occur. You most likely should cut back on the number of key / critical suppliers and increase your focus on these partnerships. Be upfront with them, hold them accountable but also share in wins and losses while working towards win-win solutions/ path forward.
• Safety preparedness: Think about how to build safety into your process; it is not a one-time activity, and it isn’t something you should prioritize after the fact.
• Risk assessments: Develop meaningful risk assessments. Unfortunately, I’ve seen many risk assessments throughout the years that were more of a “check the box” exercise and not a focus on which risks to prioritize with accountabilities for leaders to mitigate those risks. Lots of paperwork with little sustenance will not lead to success in the coming decade.
• Inspections: You should follow up the assessments with the appropriate inspections to ensure everything is in order. These can be physical inspections, process inspections and systems inspections. Every client will be in deep trouble if their ERP system or IT infrastructure goes down. Inspect your critical manual work processes, your backup systems, etc.
• Insurance: Get the appropriate types of insurance to protect your company. You will need property insurance, D&O, automobile (potentially), cyber, etc. It isn’t easy to get insurance when you need it. You must get insurance before you need it.
• Other forms of insurance: Consultants can have an insurance like quality. There has been significant turnover and transition occurring since the pandemic, and several clients have kept us on board as an “insurance” to run decisions by to gain additional insights and to jump in and fill gaps while upgrading processes as needed. Trusted advisors and consultants can fill these types of roles.
• Sprinkler systems: You should install “contingent actions” as well such as sprinkler systems although prevention is better than preparation in this case! When you need it, you must have these contingent actions “ready to go”.

Please contact us with your thoughts on preparation and prevention stories, issues, and ideas. And, please keep us in the loop of your situation and how we can help your organization prepare to thrive and mitigate your highest risks. We are introducing a new SIOP (Sales Inventory Operations Planning) assessment to ensure your supply chain is ready to support your growth plans while mitigating critical risks. Contact us if interested to discuss further. Learn more about these topics in our blog and download your complimentary copy of our recently released special report: The Road Ahead: Business, Supply Chain & The World Order.

The post Supply Chain Risks Explode appeared first on LMA-Consulting Group, a supply chain consulting firm.

There are mountains of geopolitical threats going on with significant impact on the supply chain. Most, if not all of these also relate to natural resources. For example:

• China’s threats to Taiwan: China has gone beyond tensions with Taiwan to threatening Taiwan. In the Taiwan Strait, China has normalized incursions into Taiwan’s Air Defense Identification Zone. The number, frequency, and danger behind these incursions have increased dramatically, and now China is conducting naval operations just outside Taiwan’s contiguous zone. Since Taiwan produces 90% of the world’s computer chips, you don’t have to think hard as to one of the reasons why. Not only is China #1 in the world in manufacturing including several products related to healthcare, other critical industries and national security, but its control over the South China Seas can impact the supply chain in a far greater way than the pandemic. Listen to a Supply Chain Chats video on this topic.
• Russia and Ukraine: The war has been going on for over a year and there is no end in sight. Russia and Ukraine produce many vital items for the U.S. and the world including oil (which relates to countless critical products), food and fertilizer, and several key commodities such as aluminum, nickel, and copper. These are used in products considered critical and related to national security. Listen to a Supply Chain Chats video on this topic.
• China’s Belt & Road Initiative & shopping spree: China has been investing in infrastructure and going on a shopping spree around the world in strategic places with the goal to “control” the world. For example, they are buying terminals at key Latin America ports, investing in infrastructure in places with natural resources, and buying up U.S. farmland at alarming rates. Clearly, these moves are gloomy for the outlook in supply chain.
• China’s water: China has a horrific scarcity of water in their Northern China Plain. Water is required for manufacturing, electricity, drinking and more. If China doesn’t figure out how to resolve these issues while keeping their manufacturing base intact, they might look to the water nearby in India. What will that mean for the robust manufacturing activity going on in India? Read additional details about the China water situation in our blog post.
• The need for natural resources & rare earths: Given advances in civilizations, industry, and consumer’s expectations, there is a ridiculous need for rare earths and natural resources. For example, in rare earths, we will need in next 27 years more than has been mined in the last 3000 years. Regarding copper, we will need more copper in next 10 years than we would have consumed in history of mankind. Not only are there vast shortages with these figures, but the areas related to geopolitical threats are the ones producing/ mining these items currently.

I discuss these issues at length in a recent webinar for Supply Chain Brief: Brief: Geopolitical & Regulatory Issues: The Path Forward in Supply Chain and Logistics (link direct to webinar below).

Action Plans Related to the Supply Chain

Clearly, hiding your head under a rock will not resolve these issues. Instead, we must immediately take action.

• Assess your risk: Rapidly perform a supply chain assessment. Your assessment should include your manufacturing operations (including offload suppliers, outsourced products, contract manufacturers, and internal sites inclusive of their dependency on their supply chain), suppliers (including your suppliers’ suppliers and further into your extended supply chain, your backup suppliers, etc.), your logistics (transportation, distribution, warehousing, e-commerce) partner network, your customers (and their dependencies), your infrastructure, etc.
• Upgrade your processes/ systems to proactively manage your supply chain: Roll out and/or upgrade your SIOP (Sales Inventory Operations Planning) processes, execution planning systems (demand, production, labor scheduling, distribution, replenishment, transportation), manufacturing operations and logistics capabilities, supply chain visibility and related processes/ systems. You will have to stay on top of issues, potential bottlenecks, and current status of your supply chain and be able to quickly pivot to address changing conditions.
• Supply chain control tower: Hand-in-hand with upgraded processes/ systems, you will need a supply chain control tower to understand your footprint and timely status of materials and products in your end-to-end supply chain.
• Find new sources of supply & source backup suppliers: In addition to the clear need to find / expand new sources of supply, ensure you have backup suppliers. Backup suppliers are always critical. These suppliers should not be “in name only”, meaning you need to continuously purchase a small percentage from them. For example, when VP of Operations & Supply Chain for a mid-market manufacturer, we purchased 20% of our needs for a critical raw material from a backup supplier. When that material went on allocation, we were able to source from the backup supplier and beat out larger companies because we had an ongoing relationship.
• Reshore, nearshore, friendly-shore, and expand manufacturing and mining: No doubt about it. We need to increase manufacturing capabilities near our customers and consumers. Producing to scale will be the key to success – in a site and logistics network we can “control”.
• Proactively manage demand and supply: Prioritize your SIOP (Sales Inventory Operations Planning) / S&OP process to not only align demand with supply and Sales with Operations, but, more importantly, to alert your team to strategic decisions that must be made to serve your customers profitably while maintaining your working capital so that you can invest/ expand and take advantage of upcoming opportunities. Learn more about SIOP in our newly released book, SIOP: Creating Predictable Revenue & EBITDA Growth.

Please contact us with stories, issues, and opportunities on what you’re doing to succeed and how these issues will impact your business. And, please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Learn more about these topics in our blog and download your complimentary copy of our recently released special report: The Road Ahead: Business, Supply Chain & The World Order.

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Of course, it was very exciting to be featured on Bloomberg’s ‘What’d You Miss?’ show! It speaks to the rising popularity of reshoring that Bloomberg is searching for supply chain experts to talk about reshoring and whether it makes sense.

One Tip to Implement This Week:
As I said on Bloomberg, of course, the answer of whether you should reshore is “it depends”; however, it is becoming quite attractive for many industries and situations. At a minimum, review whether it makes sense to source manufacturing closer to your end customers. If you need a push, look no further than the Amazon-like customer requirements, increasing labor costs in China, the lessening importance of labor costs as the Future in Manufacturing panel discussed, the risk of disruption (tariffs, COVID-19, natural disasters etc.) and more. I discuss this topic in depth in my eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19. 

Post COVID, disruptions and risk remain elevated as a ship got stuck in the Suez Canal, the Panama Canal experienced a drought, and the Red Sea is in chaos with ships being diverted from the Suez Canal as the war heats up in the Middle East. Geopolitical and supply chain risks are at an all-time high. Thus, smart and proactive executives are optimizing their supply chains with reshoring, nearshoring and focusing on regional supply chains. We have also launched a Supply Chain assessment so that you can evaluate how you are positioned in your supply chain. Knowing where you stand is a critical first step on your journey to optimizing your supply chain.  

June 1, 2020

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Supply Chain networks that are not set up to support scalable, profitable growth have a high likelihood of negatively impacting your customers, impeding your growth and consuming far more resources than ever imagined to sustain.  Yet what is ideally mapped out one year is likely to change the next in today’s Amazonian marketplace.  Thus, assessing your supply chain network from your suppliers’ suppliers through your manufacturing and logistics networks to your customers’ customers with an eye to customers, cost and cash will undoubtedly yield results.  

So, what are some prompts to know it’s the ‘right’ time?

1. Renew your lease, buy or move? – As your lease comes due, it is a natural time to re-evaluate your supply chain network to make sure you are positioned ideally to support your customer base at maximum value to your customers and for you. 
2. Cost considerations– As you think about how to reduce your cost base, re-evaluating your supply chain network is a ‘must’.  Most likely, you can save a few pennies here or there but for substantial savings, you might need to review your infrastructure. 
3. Customer demands– In today’s Amazonian environment, customer demands are ever-increasing.  Is your supply chain network positioned to support your customers’ needs, delivery points and sales growth expectations?
4. Space constraints – As you start to think about space constraints, it might be an opportune time to re-evaluate your supply chain network.  First, do you know how much space is needed to support your growth plans (and where)?  Do you have the opportunity to maximize space?  Or should you re-position?
5. Insourcing/ outsourcing– As you think about whether you should insource, outsource (ex. 3PL) or utilize a combination of both, it is definitely the opportune time to evaluate your supply chain network and logistics infrastructure.
6. Supply chain partners – If you are re-evaluating key supply chain partners, it is likely a good time to do a quick assessment of your supply chain network.   

We have found that a supply chain network assessment can be valuable even if you decide not to change a thing.  Performing a quick review of customers, suppliers, operations and logistics infrastructure from a customer, cost and cash flow viewpoint can provide substantial benefit every so often.  Contact us if you’d like to discuss further. In addition, take our complimentary supply chain assessment to get a quick view of your capabilities and preparedness to optimize your supply chain.

The post When is it the ‘Right’ Time for a Supply Chain Network Assessment? appeared first on LMA-Consulting Group, a supply chain consulting firm.

Our clients are thinking about whether to move and call frequently with questions such as:

1. Should we renew our lease?
2. Should we move to a lower cost area?
3. Should we move to a lower cost state?
4. What considerations should we think about when evaluating our manufacturing and logistics network?
5. Should we outsource?

Thus, we thought it would be prudent to address some questions and themes that should be evaluated from a strategic point-of-view when discussing supply chain network assessments.  Let’s start by saying that our top clients begin THINKING about these topics several years in advance.  Similar to selling a business, it isn’t the best plan to evaluate whether to renew a lease at the last minute or to be forced into a particular partner or location because you started preparing “too late”.   Instead, why not think ahead….

1. Where are your customers?  – As much as we all want to reduce costs especially in today’s Amazonian environment, we also need to remember that customers expect rapid deliveries, change their mind frequently (and expect agility) and desire easy returns.  Thus, where are you located in comparison to your customers?
2. What are your customers’ expectations?  –Lead times. Personalized service.  Return policies. Vendor managed inventory.  Future forecasts. What will they expect a year from now?  Are you already planning for these needs?
3. Where are your suppliers?  – Similar to your customers, it is important to consider where your suppliers are located as well.  Do you receive product from the ports?  If so, what volume is related to the ports?
4. What access do you have to people? – We evaluated Nevada for one of our clients; however, when we talked with local contacts to estimate building / lease costs, we also discovered that as low as the overhead might be, freight aside, there were no people.  Tesla had absorbed them all, and there were requests to supply people from Southern CA to support current workloads.  People can certainly be relevant!
5. What type of freight partners/ rates are in place? –  No matter how close you might be to your customer, freight can add up – and, more importantly, delays to your customer are VERY costly (lost business, charge backs from customers such as Walmart, ill will and more).  Just because you have carriers with your current situation, it does NOT mean that will be true with your new situation.  Freight is tight and rates are going up!  And, remember last mile considerations are complex.  Last mile. Last minute!
6. What type of transportation network is required to support your business? – In addition to freight considerations, will you need to think about parcel, rail, ocean freight, and other modes of transportation?  Or should you be considering these options?  
7. What inventory levels are built into your network?  – Inventory = cash tied up.  

There is quite a bit more to think about than solely a cost cutting exercise.  Most clients call due to concerns about cost – as important as cost is, taking the strategic / high-level view can ensure your service, total cost (including hidden costs) and cash flow are maximized.  If you are interested in our newly upgraded service offering in response to the Amazon Effect of warehousing/ supply chain network assessments, contact us.

Lisa Anderson

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