A new report from Boston Consulting Group (BCG) observes how companies can learn from the pandemic and design resilient global supply chains.
BCG’s new report outlines how companies must build more resilience into their manufacturing and supply networks—even if that resilience leads to extra costs.
“We don’t know what the next ‘black swan’ event will be or when it will occur, but now is the time to make strategic supply chain improvements that can help reduce the impact of future disruptions, says Megan DeFauw, Managing Director and Partner at BCG in an interview.
Furthermore, says DeFauw, supply chain managers need to understand the current resilience of their supply chains in an end-to-end manner, set targets for future resilience in their supply chain, and then develop a detailed plan to achieve those goals.
“Digital tools can be real gamechangers when it comes to modeling network performance in different stress scenarios, and rapidly evaluating potential network changes that would increase resilience. Companies should consider a wide range of levers to increase resilience – from investments in E2E supply chain visibility, to inventory re-optimization, to manufacturing footprint changes,” she says. “We feel pretty strongly that the value from this increased resilience far outweighs the small cost benefits companies might get when they try squeeze out a few additional cents out of their global supply chains.”
Analysts say that there are many ways companies can improve resilience in each dimension of the value chain.
In terms of sourcing, for example, they can reduce the risk of geographical overconcentration of their supply base by reallocating procurement within their existing global supplier networks in order to be closer to end markets. They can also convince vendors to shift all or some of their production to alternative locations.
Manufacturing networks can be made more resilient by expanding capabilities at existing factories and adopting a contingency strategy that prequalifies other factories within their networks and backup contract manufacturers that can quickly take on work if some facilities experience disruptions. To improve delivery resilience, companies can reoptimize inventories and stock goods closer to end markets.
Even for companies with extensive experience in global manufacturing and sourcing, the COVID-19 crisis has created a need to restructure supply chains. BCS suggests companies take the following steps to assess and adjust their supply chains: