Diversifying Your Supply Chain in the Age of Coronavirus
No doubt, many companies that make or buy products from single supply source far away from their selling markets (and that's not just China) will want to reconfigure their supply chain going forward. In fact, diversifying (and duplicating) their sources of supply to having more than one source of supply and ensuring that at least one source of supply is "closer to home". Right now, people are still dealing with stay-at-home, work-at-home and worried about their livelihood, family and personal health. But I am pretty damn sure that when days that look something closer to "normal" reappear, and they will, companies are going to address this topic with seriousness.
Back on February 6th, I wrote an article entitled "China's Coronavirus Reminded Me: Businesses Need a Business Continuity Plan". You can find that article at my website (www.desertsageadvisors.com) or on LinkedIn if you're interested to read it. Whether you view that article as prophetic or a bad omen, the subsequent weeks and months that have passed have made absolute my belief that all manufacturers and providers of products to our citizenry around the world must diversify their supply chains so that we can rely them for our critical needs. At the least, companies need to think through what they would do and how quickly they can do it if their supply chains and sources of supply become interrupted or stressed - alas, a Business Continuity Plan.
Having spent many years consolidating/diversifying, globalizing/localizing, and centralizing/decentralizing my sources of supply and manufacturing for several companies, across multiple product lines around the world, I admit that my primary goal was "optimizing" the supply chain (read: saving costs). However, over the last few years of my corporate career, I became more and more concerned that the resultant supply chains were becoming much more difficult to manage and riskier to ensure supply continuity -- not to mention making our lead-times to deliver products longer. Now, that's not to say that a global supply chain is bad; it's not. In fact, multiple (duplicate) sources of supply or production around the world, servicing their region of the world, is a great strategy - diversifies supply interruption risks and reduces lead-times to getting products to the customers in each region.
To this point, I will be following up this article with a series of posts on "how to" diversify and duplicate your supply chain (sources of supply & production). I will also describe detail steps on evaluating your product lines supply sources, key decision point you must commit to, and methods of executing a diversified supply chain in an efficient and effective manner. I welcome you sharing the posts/articles with others and sharing your comments with me as well as your observations on how to best address this critical topic.
Along the way, because we all could use a laugh right now, I will share a humorous (I hope) anecdote related to our topics. Let me end this post with the topic of TOILET PAPER. Has anyone had trouble buying toiler paper over the last month or so? (you can laugh out loud now). Last week, the CEO of P&G stated that in the prior week, his company produced enough toilet paper so that every American (all 330 million people) could have 1 roll of toilet paper -- does any one person really need more than 1 roll of toilet paper per week? My engineer/statistician neighbor figured out that an "average user" of TP should have 1000 days of supply if they buy one 30-pack of TP - Don't ask me to detail his calculations - You don't want to know!! Anyway, I think it's a great testament to a company that has obviously diversified (duplicated) it's resources and were able to flex & ramp-up their production rates by more than 40% in a few short weeks -- really amazing!
Until my next post, I wish everyone good health and adequate supplies! Look for my next article in the coming week or so as I lay out my thoughts on how to diversify your supply chain sources. Again, I welcome your comments and ideas to share with the broader LI community.
--- Tom Weikart, Desert Sage Advisors