Supply chain risks such as natural disasters, health and safety hazards, and data breaches pose significant challenges to manufacturers, often resulting in major disruptions. But while most disruptions can be contained and improved upon, the impact of Covid-19 has been unprecedented.
Unlike any other crisis in our lifetime, the pandemic caused immediate and far-reaching disruptions across global supply chains, the effects of which will continue to be felt for years to come.
However, amidst the challenges, the pandemic has also given us valuable lessons in better supply chain management.
How Covid-19 negatively impacted the supply chain
Covid-19 caused global disruption across trade, finance, health and education systems, businesses and societies on a scale never seen before. But one of the most immediate impacts of the pandemic was the impact on supply chains.
Restrictions on people's movements impacted transportation networks, limiting the movement of goods. Many manufacturing facilities experienced labour shortages as workers fell ill, had to self-isolate or faced difficulties commuting to work, resulting in reduced production capacities and delays in meeting demand.
Some factories were forced to close or operate at reduced capacity to comply with health and safety regulations. This led to further bottlenecks and disruptions in the supply of components or manufactured goods.
Demand for non-essential goods declined whilst demand for products such as personal protective equipment (PPE) and medical supplies surged, with production and inventory management taking a hit.
The pandemic also exposed vulnerabilities in global supply chains as disruptions in one region cascaded throughout the network, leading to shortages and production delays.
These disruptions highlighted the need for more resilient and agile supply chain strategies to mitigate future risks and build robustness in the face of future unexpected events.
As an Electronics Manufacturing Services (EMS) provider, we've been able to apply many of these lessons to our operations. As an Original Electronics Manufacturer (OEM), you can too.
So, just what have we learnt?
Lesson 1: Don't put all your eggs in one (far away) basket
During the pandemic, transportation restrictions made it challenging to rely on suppliers located far away from your manufacturing facilities. Those with local suppliers fared better.
Having local alternatives reduces the risk of disruptions, ensuring that manufacturers have access to essential materials and components. Closer geographic proximity means faster response times, reduced lead times, and increased flexibility to adapt to sudden changes in demand or supply.
Working with local partners also enables you to build closer relationships and conduct site visits more easily, putting you in a better position to work together effectively should any challenges arise. In doing so, you'll also support the local economy and contribute to a more sustainable supply chain.
You can also reduce your reliance on a single source by engaging multiple suppliers. So that in times of crisis, you can switch between local suppliers, ensuring production can continue and reducing the risk of prolonged downtime.
Lesson 2: Always plan ahead
As an EMS provider, we always encourage customers to give us as much forecast information as possible. Ideally, this will include formal orders or some form of agreement to ensure demand is appropriately loaded into the system.
In the past, OEMs could get away with being vague about their demand when working with EMS companies. But now, there's a growing recognition of the importance of providing comprehensive forecasts, as it can lead to smoother operations and reduce supply chain risks.
By aligning your expectations and working closely with your EMS partner, you can avoid unnecessary disruptions and take proactive measures to meet demand requirements.
Lesson 3: Only order what you need
There are several problems with ordering in excess of demand. It may seem like a way of ensuring demand is met, but it ends up being far more troublesome for both you and your EMS provider.
One key issue is that ordering excess quantities adds to inventory costs and ties up valuable capital. Another is that over-ordering could ultimately lead to product obsolescence. You could end up with inventory that can't be utilised, wasting resources and reducing your ability to keep up with market demands.
In addition, excessive orders can also put significant strain on the supply chain, resulting in increased lead times, reduced flexibility and potential disruption that will only end up causing you further trouble later down the line.
And then of course, there's the sustainability issue. Overordering produces more waste and puts a strain on the environment thanks to excess production, transportation, and disposal of unused materials. By only ordering what you need, you reduce your impact on the environment.
Lesson 4: Consider all options from the start
There's a valuable lesson for manufacturers and customers when it comes to the design of electronic devices: add more alternatives from the get-go.
By including multiple options for components in the Bill of Materials (BOM), OEMs give EMS providers more flexibility in sourcing materials.
Of course, there will be cases where specific components have limited choices. For example, when it comes to very specific ICs, displays, and enclosures, there may only be one choice.
But when looking at passive components, such as resistors, capacitors, and also some of the more 'basic' semiconductors, adding more options to the BOM can be beneficial.
There's a broader lesson here about design for procurement and the importance of taking time at the very beginning to consider all possible options. Is there just one component or material crucial to the design and functionality? Or are there alternatives that would work just as well - or even better?
By challenging those initial choices and expanding the possibilities, OEMs can assess the value of each component. In doing so, you optimise your BOM and give yourselves and your customers more flexibility in sourcing. You could even improve the overall product.
Summary
The Covid-19 pandemic shook the world upside down overnight and bought immediate challenges to the supply chain, which will reverberate for years to come. However, it has also presented valuable lessons to help us navigate future disruptions and build more resilient supply chains moving forward.
The key takeaway from these crucial supply chain learnings is the need for adaptability, collaboration, and proactive planning. By implementing these lessons, OEMs can build more resilient supply chains, enhance customer satisfaction, and thrive in a complex landscape.
