While the majority of manufacturing continued as an essential business during the strictest shutdowns, the industry hasn’t been immune to challenges. Even with the economy working through various reopening stages, manufacturers are still looking at additional challenges in disaster recovery, supply chain, staffing, and investments.
A Different Kind of Disruption
Different from past, more localized epidemics such as SARS, COVID-19 has had a more drastic impact that is making it difficult to predict what the new reality will be once the virus finally recedes or is combatted with a vaccine. Even other natural disasters such as earthquakes and tsunamis that have disrupted supply chains were more localized in damage, even as the effects were felt throughout the world’s economy.
Yet COVID-19 presents a significantly new and different challenge due to its drastic impact on the global supply chain.
4 Challenges to the Global Supply Chain
- Spread and duration of the pandemic virus. Despite all best efforts, there’s little surety in predicting when COVID-19 will be completely controlled, or even if/when it might resurface. With the effects of most natural disasters, it’s easier to predict that within a few months, operations could be back to normal. Manufacturing is facing a lot of uncertainty in the availability of and impact on the global supply chain.
- Disrupted demand and supply. Many factories have had to shut down completely because of the virus, which of course affects the supply aspect. But with shutdowns keeping consumers at home, demand has changed drastically as well. Intricate, interconnected, and interdependent global supply chains are facing major changes to supply and demand.
- Longer lead times. Asian countries provide the US with nearly a trillion dollars of product annually. With an already stretched lead time of four to six weeks for sea transport, the pandemic has increased that lead time, and earlier on, even stopped it altogether. Manufacturers need to account for the additional time it will take to fill the pipeline back up, and plan for increased lead times.
- Minimal slack or spare inventory. Suppliers come in all sizes and tiers, with many smaller companies not running on much financial slack. With some having as little as only three months of cash on hand, a shutdown of two months can eat through reserves in a hurry, which may cause an inventory shortage.
Looking Toward the New Normal
It’s not all bad news. While future market predictions may feel impossible to make, there are opportunities to help speed recovery and bring supply chains back to more normal activity.
- Bring capacity online. While it could take small and mid-sized companies time to restart, plan now for staffing and inventory needs. Look at other opportunities for sourcing materials and make a plan for how much inventory you need to build up to restart production. Understand that there will be excess demand for limited supplies, and plan accordingly.
- Distribution. With lead times already long, they could get longer with a jump in demand for logistics and distribution. Some businesses may choose to shift or increase their distribution capacities to meet the rising demand.
- Build slack. Now is the time to look for ways to preserve cash, get new lines of credit, or even cut dividends to add some cushion to cash reserves. With materials in short supply, consider building inventories now of the critical components you need to keep your business running.
Build for the Future With ASI
To thrive in the midst of uncertainty, manufacturers should strive to have a good understanding of what is happening to both their customers and suppliers up and down the line. That starts with having real-time insights into what is going on in their own businesses. The right ERP solution can provide meaningful reports for better data analyzation, tools for better inventory management, integrated warehouse capabilities, process improvements, and streamlined operations. With the ability to coordinate production planning, material purchasing, and shop floor scheduling in real time, manufacturers can build a more solid approach to the reopening economy and position themselves for success going forward.
Find out how a connected, real-time ERP solution could support your manufacturing business now and for the future. Request your free consultation with one of our experts now.