This article is written by Rajesh KhatriVice President, Passenger Vehicle Business Unit, Tata Motors
The impact of the COVID-19 pandemic on supply chains around the world has been deeply disruptive, to say the least. Due to sudden lockdown, demand and supply fluctuations, logistics disruption and shortages, the automotive industry was lying in the deep end for more than a year and is still recovering from the shock. The global semiconductor shortage continues to haunt the automotive industry today. What the pandemic has taught us is, above all, the need to completely rethink our strategic objectives when it comes to supply chains.
Before the pandemic, much of the supply chain was focused on cost-optimization and throughput—the priority was to source parts as quickly as possible at the least cost. We weren’t really thinking about flexibility or business continuity plans, or wondering what if a customer demands changes that happen dramatically overnight? But post COVID-19, these questions have become central to supply chain management. As we venture into the future and plan for 2022 and beyond, it is time to reorient our supply chain strategies to be FutuReady.
Basics in Covering Base-Supply Chain Planning
At the primary level, it is important to ensure that the supply chain works well according to certain basic parameters. For example, it is essential that we have full visibility of our overall supply chain. We need to look at it at levels taking into account the demands of the customers, the technicalities of purchasing raw materials, semi-finished goods, or the components that go into our finished goods. The further down we can go down the supply chain, the more effective we will be in planning our supply chain. A close understanding of manufacturing and warehouse processes, logistics, shipping and third-party logistics can also provide opportunities for customization. In addition, a solid understanding of cost structure at a unit level is very important to prevent sudden supplier breakdown and can help organizations keep costs under control while maintaining stable margins, even as costing them May also allow the leverage of supplier groups to reduce
In addition, it is also necessary to diversify the supplier base. It is important that you make sure you have a Plan B, a Plan C, and backup vendors in case one vendor cannot meet your needs. This can reduce purchasing power with a given supplier, but it can be a worthy trade-off while gaining flexibility, dependability, and reliability within your supply chain. Your existing suppliers should also be reliable. When determining supplier credibility, make sure you consider a few questions such as: Is it possible that our suppliers will have to shut down or not run at full capacity during a difficult time? Are they actively cooperating with their supply chain on changes in demand, capacity requirements and other important factors? Are they adequately staffed?
Ensuring business continuity with supply chain optimization
Once we’ve covered our fundamentals, we can optimize the supply chain in a number of ways. For example, consider ways you can simplify products and standardize parts. Highly complex products involve large quantities of ingredients, complicating supply chains and risking disruptions. Instead, purchasing standard catalogs rather than product-specific parts can help maintain a lean supplier base – in the case: an application specific integrated circuit in the semiconductor industry. Another way to minimize disruption to the supply chain is to optimize logistics. Purchasing parts locally rather than acquiring them worldwide can help mitigate geopolitical risks.
Demand and supply planning can also be important for increasing efficiency in the supply chain. Companies that align demand with supply have an edge over the rest. Since this delicate balance begins with proactive management of demand, demand planning and forecasting acquires significant priority. Being in sync with the needs of your customers improves customer experience, accelerates cash flow and lowers profits. To understand fluctuations in demand, it can be useful to focus on the ground and get in touch with stakeholders (customers, sales staff and customer service representatives). On the supply front, it is important to ensure capacity readiness and maintain agility and flexibility while consistently delivering on demand.
On a broader level, it is also important that we learn to manage risks proactively, not reactively. While it is certainly impossible to predict black swan events such as pandemics, one can remain acutely aware of one’s own vulnerabilities, particularly those of pressure areas in the supply chain. Establishing a comprehensive business continuity plan can prove invaluable in this regard, providing a systematic framework for companies to anticipate risks and work towards mitigation. The moment there is a sense of risk from any area, this BCP should be set in motion. This can play an important role in allowing OEMs to insure themselves against long-term damage.
A vision for the future digitalsustainable, productive
Ultimately, the supply chain networks of the future must incorporate the larger values of our ever-changing world. Advances in online connectivity and digital technology have made themselves evident and have the potential to revolutionize the functioning of supply chains. Digital equipment (a supply chain control tower) can provide real-time data, predict trends, provide early warning signals, and closely track supply performance. At the same time, we must also keep pace with the global move towards sustainability. Supply chains must build a roadmap to achieve net zero emissions, water neutrality and complete recycling of materials over the next few decades.
Going forward, we must strive to build an agile, productive, resilient, digital and sustainable supply chain driven by strategic business continuity plans and proactive risk management at the core.
Disclaimer: The views and opinions expressed in this article are solely those of the original author and do not represent those of The Times Group or any of its employees.
The impact of the COVID-19 pandemic on supply chains around the world has been deeply disruptive, to say the least. Due to sudden lockdown, demand and supply fluctuations, logistics disruption and shortages, the automotive industry was lying in the deep end for more than a year and is still recovering from the shock. The global semiconductor shortage continues to haunt the automotive industry today. What the pandemic has taught us is, above all, the need to completely rethink our strategic objectives when it comes to supply chains.
Before the pandemic, much of the supply chain was focused on cost-optimization and throughput—the priority was to source parts as quickly as possible at the least cost. We weren’t really thinking about flexibility or business continuity plans, or wondering what if a customer demands changes that happen dramatically overnight? But post COVID-19, these questions have become central to supply chain management. As we venture into the future and plan for 2022 and beyond, it is time to reorient our supply chain strategies to be FutuReady.
Basics in Covering Base-Supply Chain Planning
At the primary level, it is important to ensure that the supply chain works well according to certain basic parameters. For example, it is essential that we have full visibility of our overall supply chain. We need to look at it at levels taking into account the demands of the customers, the technicalities of purchasing raw materials, semi-finished goods, or the components that go into our finished goods. The further down we can go down the supply chain, the more effective we will be in planning our supply chain. A close understanding of manufacturing and warehouse processes, logistics, shipping and third-party logistics can also provide opportunities for customization. In addition, a solid understanding of cost structure at a unit level is very important to prevent sudden supplier breakdown and can help organizations keep costs under control while maintaining stable margins, even as costing them May also allow the leverage of supplier groups to reduce
In addition, it is also necessary to diversify the supplier base. It is important that you make sure you have a Plan B, a Plan C, and backup vendors in case one vendor cannot meet your needs. This can reduce purchasing power with a given supplier, but it can be a worthy trade-off while gaining flexibility, dependability, and reliability within your supply chain. Your existing suppliers should also be reliable. When determining supplier credibility, make sure you consider a few questions such as: Is it possible that our suppliers will have to shut down or not run at full capacity during a difficult time? Are they actively cooperating with their supply chain on changes in demand, capacity requirements and other important factors? Are they adequately staffed?
Ensuring business continuity with supply chain optimization
Once we’ve covered our fundamentals, we can optimize the supply chain in a number of ways. For example, consider ways you can simplify products and standardize parts. Highly complex products involve large quantities of ingredients, complicating supply chains and risking disruptions. Instead, purchasing standard catalogs rather than product-specific parts can help maintain a lean supplier base – in the case: an application specific integrated circuit in the semiconductor industry. Another way to minimize disruption to the supply chain is to optimize logistics. Purchasing parts locally rather than acquiring them worldwide can help mitigate geopolitical risks.
Demand and supply planning can also be important for increasing efficiency in the supply chain. Companies that align demand with supply have an edge over the rest. Since this delicate balance begins with proactive management of demand, demand planning and forecasting acquires significant priority. Being in sync with the needs of your customers improves customer experience, accelerates cash flow and lowers profits. To understand fluctuations in demand, it can be useful to focus on the ground and get in touch with stakeholders (customers, sales staff and customer service representatives). On the supply front, it is important to ensure capacity readiness and maintain agility and flexibility while consistently delivering on demand.
On a broader level, it is also important that we learn to manage risks proactively, not reactively. While it is certainly impossible to predict black swan events such as pandemics, one can remain acutely aware of one’s own vulnerabilities, particularly those of pressure areas in the supply chain. Establishing a comprehensive business continuity plan can prove invaluable in this regard, providing a systematic framework for companies to anticipate risks and work towards mitigation. The moment there is a sense of risk from any area, this BCP should be set in motion. This can play an important role in allowing OEMs to insure themselves against long-term damage.
A vision for the future digitalsustainable, productive
Ultimately, the supply chain networks of the future must incorporate the larger values of our ever-changing world. Advances in online connectivity and digital technology have made themselves evident and have the potential to revolutionize the functioning of supply chains. Digital equipment (a supply chain control tower) can provide real-time data, predict trends, provide early warning signals, and closely track supply performance. At the same time, we must also keep pace with the global move towards sustainability. Supply chains must build a roadmap to achieve net zero emissions, water neutrality and complete recycling of materials over the next few decades.
Going forward, we must strive to build an agile, productive, resilient, digital and sustainable supply chain driven by strategic business continuity plans and proactive risk management at the core.
Disclaimer: The views and opinions expressed in this article are solely those of the original author and do not represent those of The Times Group or any of its employees.