2021-01-08

6 Crucial Strategies For Supply Chain Risk Management

Having plans to tackle various supply chain challenges may be what guarantees your business survival or even market share. Today, natural disasters and trade wars have been at the forefront of global manufacturing supply chain disruptions. For both established and emerging businesses, effective supply chain management is crucial for business survival and unplanned disruptions. So, how then do businesses manage their supply chain against uncertainties? How can startups their inventory risks, and how can big players maintain price competitiveness? In this article, Firstpart highlights five actionable solutions to help you mitigate the risks in your supply chain.


COVID-19

Before we dive into our key strategies for supply chain mitigation, we have decided to skim through one challenge that no one saw coming in 2020 – the COVID-19. While the US and other countries have already begun advancements in getting vaccines worldwide, a throwback to the second and third quarters of 2020 will highlight how many businesses were hit, and some entirely extinguished.

 

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The COVID-19 pandemic is one of the disruptions that can cripple your supply chain. With China, the global manufacturing capital, on lockdown, product leadtimes climbed as much as 200%. Even tech giant Apple immediately revised sales budgets and communicated the lack of supply to produce their devices to all existing investors. At Firstpart, we have decided to share our key takeaways from Covid-19 and other dissimilar situations that can flutter supply chains. Read on to find out more.


Spend more on risk management now

Depending on the finance, cash flow, and level of the organization, companies can save money by spending more money today to prevent paying more in the future. Where the cost of not having supply becomes higher than the cost of supply continuity, premium brands will struggle more than everyday brands.

To ensure continued supply, companies should invest in their inventory management and supply chain and incur upfront costs to manage supply better. For instance, if rubber is a crucial part of your product, you may begin to think of diversifying your profit into building a processing plant. You will reap the dual benefits of controlling quality and ensuring raw material availability at a lower price.

This strategy can be quite heavy for startups and everyday brands, on the other hand, because of the substantial capital requirements. For instance, it may make very little economic sense to have a small smartphone company invest in paper processing to mitigate packaging supply chain risks.


Diversify product portfolios

When Apple announced its line-up of iPhones for 2020, four models – the iPhone 12 mini, iPhone 12, iPhone 12 Pro, and iPhone 12 Pro Max. Out of these 4 models, only 2 were immediately available for purchase, with the mini and Pro Max shifted to a later release date due to some supply challenges. However, Apple could still sell their products because of their diverse line of smartphones, meaning something was available for anyone who wanted a new phone immediately. This is a prime example, emphasizing the need to diversify product offerings. By broadening your product offerings and range, your business can offer variants of the same product that may remain feasible in the event of scarcity of raw materials. For instance, if you require silicone to make certain phone cases, a dearth of the raw material doesn't keep you from producing and marketing leather phone cases of the same design.

 

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Plan against future disruptions

The recent Covid-19 pandemic has been an eye-opener and reminder to most businesses that it is crucial to plan for different scenarios. Since there are no guarantees, companies must use hypothetical scenarios to test their supply chain's agility in different scenarios. Perform a quarterly revisit to gauge your business's response in past situations of shortages, scarcities, or pandemics and explore how the company could have responded better, the financial implications, and market share gains or losses.

 

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Source from multiple suppliers and different regions

Another strategy for mitigating supply chain risks is to have multiple suppliers on your procurement schedule. Using 2, 3, or even 5 different suppliers across different regions can help you lower the chances of complete downtimes when challenges arise. If you require 100kg of a chemical component monthly, you may assign 200, 300, and 500 or 400, 300, and 300kg to different suppliers to reduce risk.

Sourcing from multiple suppliers comes with its demerits. For one, the quality and consistency of the raw material may differ. Your raw material's average cost will also vary across suppliers, especially when transporting from different geographic areas.

If you can benchmark your quality grade, you may not only be able to mitigate supply risk but achieve an even lower cost per piece of your part due to price differences. Sourcing from different regions is imperative as the effect of other issues like political unrest, natural disasters, pandemic, and tariffs may differ from region to region. By using dual or triple suppliers, you can also reap advantages like order flexibilities and lower labor costs. With supplier diversity, you can easily tweak the order volumes for each one in the event of failure from another supplier and ensure that your product remains available in the market.

 

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Build lasting partnerships

By maintaining positive relationships with your suppliers, you can benefit from sentimental situations that are mutually beneficial. Practice give-and-take relationships and understand what your supplier needs to continue providing services to you. For instance, in times of disruptions, your supplier may require advance payments in exchange for quicker deliveries or lower price-per-piece. By maintaining strong and healthy partnerships, you can work with your suppliers to reduce their sourcing inhibitions, essentially helping them to help you.

If your business owns a private fleet that can ship some materials from a particular destination, you can offer your suppliers your vessels at competitive rates in exchange for faster/prioritized supply or lower cost. A seamless level of communication and visibility into supply chain metrics can also help you and your business identify areas for improvement, cost savings, and overall supply chain optimization. 

 

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Go digital

With digital manufacturing solutions like our services at Firstpart, businesses can mitigate and lower the sizeable cost of dual or triple supplier sourcing. Going digital also means that you can embrace lean manufacturing on a large scale with 3D printing, CNC machining, and rapid prototyping solutions. By working with us, you can take advantage of our robust manufacturing network of vetted suppliers to deliver high-quality raw materials and components that go into making your parts.

 

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FirstPart Rapid Prototyping & Low-Volume Manufacturing in China

Looking to make your ergonomic parts with optimal packaging design? FirstPart is one of China’s leading manufacturing hub for Additive, CNC and conventional manufacturing techniques. In our array of manufacturing techniques, we carefully optimize our systems to achieve tight tolerances and make parts that adhere to client specifications for improved fit, functionality and overall quality.

 

We boast of excellent in-house capacity, labor force and logistics while delivering exceptional value for money. Our array of services include CNC machining, CNC turning, CNC milling, 3D printing, Rapid Tooling, Die casting, Rapid prototyping, Plastic Injection Molding, Urethane Casting, Aluminium Extrusion, Post-machining/Finishing services and much more. We also handle global logistics, and will deliver your parts within 7 days of manufacturing and finishing operations.

 

As we understand the global challenges that is faced by new and existing businesses in these times of the Coronavirus, we offer product tooling, mass production, bridge tooling and low-volume prototyping/manufacturing with very flexible minimum order quantities (1 to 100,000). Our services are online, scalable and innovative, with a team of engineers and design experts available to support you through your entire product development cycle. Click here to get in touch with us and receive a free quote and project review. 

 


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