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Supply chain resilience

Industry trends and supply chain strategy for manufacturing

According to the Supply Chain Resilience Report 2020 from a global leader in distributed manufacturing, cybersecurity issues have affected less than ten per cent of companies over the past ten years, compared to 60 per cent that have suffered directly as a result of COVID-19 disruption.

In 2020, the pandemic has emerged as the most potent threat to economic growth, more than trade sanctions, natural disasters and cyberattacks combined. Over 96 per cent of global companies are now planning to take measures to boost the resilience of their manufacturing supply chains. However, more than half (52 per cent) admit they are yet to embark on that journey. As businesses develop long term strategies, over 59 per cent of companies say geographic diversification of their supply chains is the most effective way of building resilience. Complex manufacturing supply chains face more risks than ever. A disruption in one country ripples around the world, leaving unprepared companies to experience damaging interruptions. Simultaneously, the number of such disruptions is rising. As each risk has unique elements and timing, planning and prediction is impossible. Traditional strategies don’t support the adaptability required to survive, let alone grow stronger. However, some organisations are able to react to disruption more successfully than others and a company’s ability to cope with unknown and unpredictable risks is due to one characteristic – resilience.

Supply chain resilience and managing risk is one matter, but some are able to respond and indeed benefit from disruption. Being able to “step up” when others can’t is one way of working towards ‘future-proofing’ an organisation, even one with a lengthy supply chain. Resilience is not a new concept, but the need for it has become greater as the frequency and severity of risks have increased, which comes naturally with an increasingly complex, globally-stretching supply chain. Supply chain resilience does not develop passively, as it’s impossible to plan for every potential risk. Instead it demands a dedicated, deliberate strategy to strengthen an organisation in the face of the unexpected.

From trade wars to pandemics to changing labour environments, supply chain resilience is becoming a priority for many companies. The rise of global trade means companies have more moving pieces stretched over greater distances with less slack in the system. At the same time, companies may still rely on a single company for certain parts to be able to achieve lower costs.

Dependency

Reducing essential processes and resources to a single or a few sources creates a dependency on deep-tier suppliers as well as on concentrations of supply sources that create fragile chokepoints in the global economy. Only a handful of countries are responsible for the world’s supply and, as many companies experienced with the coronavirus outbreak, this over-reliance can have catastrophic long-term effects on supply chain operations. Additionally, a fragile supply chain often leads to damage to a company’s brand reputation as customers express their displeasure. Unfortunately, disruptions cannot be avoided. Instead, companies must prepare to overcome challenges, which may mean rolling back some supply chain innovations of recent years, such as lean manufacturing, to develop long term resilience.

Supply chain volatility

There is an increase in the frequency of supply chain volatility with companies compelled to examine all variations of risk to protect themselves and their customers.

The following are just some of the issues that can create supply chain volatility affecting production and/or logistics operations:

  • Trade tensions/wars.
  • Cyberattacks.
  • Natural disasters.
  • Labour disputes.
  • Port disruptions.

The global COVID-19 pandemic is considered an unanticipated disruption! Of course, this is an extreme example of supply chain disruption, but it has been one that vast numbers of organisations around the world have had to simultaneously respond to. Whilst global pandemics are a rarity, the situation does warrant concern when offshoring or relying on too few sources in a supply chain; the “all your eggs in one basket” scenario!

Despite the numerous types of supply chain disruptions that could occur, there are three key categories that risk managers have reported to fear the most – natural disasters, geopolitical issues and cybersecurity.

As part of the 3D Hubs survey, top supply chain disruptions that have impacted business in the last ten years were: pandemics (59 per cent); natural disasters (29 per cent); trade wars (21 per cent); cyber attacks (9 per cent); military conflicts (4 per cent).

Geopolitical issues

The US-China tensions and trade tariffs are impacting attitudes and in some cases result in actions to re-shore or relocate production facilities to other nations with less tariff exposure.

Brexit is another disruptive event that will have global implications. As the situation is still developing companies in the UK and overseas are unable to plan for any form of an international trading environment. These type of situations highlight the vulnerability of relying on only a few key suppliers in critical locations. However, moving centralised production to a new location can be an expensive and time consuming endeavour, which could result in a similar risk at the new site. Manufacturing disruptions could result from broken links in supply chains.

Natural disasters

Companies have no control over this situation and can’t anticipate relief from governments. Natural disasters such as hurricanes, floods, earthquakes, tsunamis, volcanic eruptions and storms take their toll on supply across the world. With the mounting effects of climate change it seems that the occurrence of such events is growing. An example of such a disruption to supply is that caused by Japan’s earthquakes and tsunami in 2011, with Toyota being just one of the high profile companies to suffer; according to a BBC report in August 2011 the car manufacturer reported a 99 per cent drop in quarterly profits. Other examples are the Icelandic ash cloud and Australia’s wild fires.

Cybersecurity

The rise of digital has opened up cybersecurity as a growing risk to the supply chain. The problem is not just confined to deliberate attacks, technology is also vulnerable to software glitches and telecommunications failures.

Cybercriminals have moved beyond stealing information and are now targeting industrial control systems. Holding technology assets for ransom is a growing trend. However, whilst the Supply Chain Risk 2020: New Worries report from SCM World Future of Supply Chain surveys (2017) indicates that a large proportion of respondents expressed concern over cyberattacks (44 per cent), only nine per cent had actually experienced one in the past ten years. The Supply Chain Resilience Report 2020 reminds that it is critical to think about a risk-management framework to classify risks and to develop a supply chain that is flexible and adaptable. Warning that disruptions are not a ‘one-and-done’ event.

Extreme example of supply chain disruption

The global impact of the COVID-19 pandemic has clearly had a great effect on manufacturing in terms of personnel, supply chain, revenue, and operations and the repercussions are ongoing. As the coronavirus pandemic is one of the first examples where manufacturing capacity has been affected simultaneously worldwide, it's an illuminating case study on the consequences of concentrated versus distributed manufacturing. The crisis highlighted the shortcomings of single-source manufacturing, whereby one sole vendor is selected to produce a component part, or sometimes an entire product. The prevalence of choke-points became very apparent as shutdowns rolled out across the world and the manufacturing bases in a particular country became idle. It is a unique situation because it affects both supply and demand.

Many companies faced immediate loss of supply when China began isolating in many parts of the country, with no alternatives. Labour shortages, lack of available inventory, and in some cases an excess of inventory, have challenged companies’ supply chains. Some industries with available inventory were able to ramp up to meet heightened demand, while others were unable to fulfil orders regardless of changes to pricing.

According to the figures from the survey, in March and April 2020, the supply capacity in Asia began to recover from its slump in January and February, while at the same time capacity in Europe started to fall. If North American or European companies were wholly reliant on Asia for supply, with no easy access to local suppliers, their businesses would have ground to a halt in February, near the beginning of the COVID-19 outbreak.

However, despite supply capacity fluctuations, globally suppliers have been able to keep pace with demand. Thus by building out a network of suppliers, distributed across the globe, there will always be supply (and demand to meet it) available. The distributed approach provides a future for resilient manufacturing, which offers reliable and scalable supply.

MITIGATING DISRUPTION

Simplifying a supply chain where possible and reducing dependency on external parties will leave a company less vulnerable to potential disruptive events. Automation is a way of reducing reliance on manual labour, particularly advantageous if facilities are forced into a lockdown.

Also, by reducing links in the supply chain and increasing the speed of outsourced production, companies have more manoeuvrability and can react and adapt more quickly to disruptive circumstances. Speed in the supply chain also leads to a faster recovery after the disruption. Additional inventory would help, especially relevant for critical parts where it is difficult to outsource quickly.

Flexibility is also key to mitigating disruption such as making it easy to shift production between facilities, encouraging agility in internal working processes by completing tasks simultaneously instead of sequentially. In this way resources can be reallocated where needed and unfinished products can be adapted to meet demand. Thus cross-training employees is important. Increasing visibility over the whole supply chain would enable a company to spot oncoming disruptions faster, giving increased time for reaction. Of course, one of the most helpful things to do is to build deeper relationships with suppliers, thus potential issues can be highlighted sooner.

Whatever, the long term consequences of recent months, let’s hope that building supply chain resilience becomes one of the mantras companies adopt to ensure survival and progression moving forward.

3D Hubs offers a platform for engineers to access manufacturing partners. Through its global network of over 240 carefully selected manufacturing partners, the organisation offers a wide manufacturing supply chain; without customers having the need to manage it. The network has over 2,300 machines offering CNC machining, 3D printing, injection moulding and sheet metal fabrication as well as 60 different materials and nine finishes. www.3dhubs.com

The 3D Hubs Supply Chain Resilience Report 2020 includes insights from an industry survey of 1,281 professionals, its own database of 36,000+ companies, and 240 global manufacturing partners.

Key findings include:

  • Around 72 per cent of companies have experienced external disruptions to their manufacturing supply chain over the last ten years. Pandemics, natural disasters and trade wars are the most common disruptive events. Despite being a major concern for many companies, less than ten per cent have experienced disruptions due to cybersecurity issues.
  • The COVID-19 pandemic has been the single biggest disruptive event of the past decade, causing major volatility on both manufacturing supply and demand. Around 60 per cent of all companies report the novel coronavirus directly disrupting their manufacturing supply chain.
  • Following the outbreak of COVID-19, over 96 per cent of companies believe measures should be taken to avoid future supply disruptions, but only about half (52 per cent) have done so to date.
  • Over 59 per cent of companies believe that geographically diversifying their manufacturing supply is the best way to prevent future disruptions. Creating more autonomy by investing in automation and developing more transparency throughout the supply chain can also help companies build resilience.