Coronavirus and Brexit have raised a red flag over the supply chains of many manufacturers within Britain, leading many to ask, “how robust is our supply chain?”. This is largely due to the over reliance on China and using key suppliers to promote economies of scale.
Within supply chain management there is often added pressure to keep the supply chain as cost efficient as possible while balancing this with the need for flexibility and resilience in the case of unanticipated events.
The focus now though appears to be shifting, as businesses look to rebuild resilient supply chains which can withstand extreme levels of disruption. Cost will still remain as always, a crucial factor; that said, events of late have forced leaders to re-evaluate this position and place other areas of consideration above this.
Single sourcing has remained a popular method due to the benefits associated; that said, it is becoming more common to diversify the supply chain through dual/multi-sourcing suppliers so as to not put all eggs in one basket. Also, having suppliers in multiple locations is an option for businesses who still wish to source from countries such as China or South Korea while simultaneously removing the over-reliance on them, decisions around what is to be made in-house vs what to outsource and reshoring manufacturing completely, are a few potential considerations for businesses to achieve a resilient and robust supply chain.
Single Sourcing Suppliers
Single sourcing has a number of benefits such as better channel visibility as one partner is responsible for the entire order, minimal variation in finished product quality and lower costs due to scale economies which can ultimately be passed on to the customer and stakeholders.
A primary benefit of single sourcing is accountability. As a “single source” is responsible for the entire project, there can be no blame passed on to others if the quality is not up to standard or if there is a delay in delivery. This heightened sense of responsibility often results in a more efficient service and high-quality finish so as to not damage relationships and/or brand reputation.
At ADS we have found this to be a relatively common option for our customers up until now, as we are capable of laser cutting, forming, fabricating, metal finishing, assembling, storing and delivering a project all inhouse – enabling us to have full control over finished product quality and lead times.
Dual/Multi Sourcing Suppliers
Dual, which refers to having two suppliers (or multi, which is typically more than two, although these terms are often used interchangeably) sourcing suppliers may be necessary if a current supplier does not have the capacity to deal with a large volume order, or if developing a new product for example it is found a current supplier does not have the capabilities to keep all processes inhouse.
Improved lead times can be achieved by staggering your calendar between suppliers and improved costs can also be achieved by dual (multi) sourcing as it is not uncommon for suppliers to “bid” against one another in order to win work, subsequently driving prices down.
Globalisation has opened up the supply chain to an abundance of opportunity, regarding sourcing from multiple locations globally. This may have resulted in major cost benefits for companies who upped and moved component part manufacture etc to countries where costs are lower, and output is increased.
That said though, events such as Brexit and the Covid-19 pandemic which is still impacting almost every country around the world have forced businesses to re-evaluate this.
Notable issues with importing of late include significantly longer lead times as time spent on the water for goods imported from the far east is often weeks anyway, which is a long time for random events such as weather, piracy and port delays to further lengthen the time to delivery – most recently, a ship which blocked a vital shipping lane, the Suez Canal, caused massive global disruption. The Covid-19 pandemic has also been said to have doubled lead times.
Shipping costs have risen exponentially in some cases too, from $2000 to more than $9000 from Asia to Northern Europe. Opting to manufacture in other countries, as well as reshoring some, is seen as an option for mitigating these risks in case of future unforeseen circumstances similar to recent events.
Sourcing multi-location suppliers does not only relate to locations globally, but it can also be beneficial for businesses who have locations up and down the country they reside in, to source suppliers local to these in order to bring down delivery costs.
“Make vs Buy”
Business closures have unfortunately been a result of recent events, which when a trusted supplier closes down becomes a significant factor in a business pausing and evaluating which route to take to proceed.
A “make vs buy” decision is the process of deciding whether to outsource manufacture to a supplier or manufacture inhouse, otherwise known as the “outsourcing decision”. A cost/benefit analysis is typically done to assess the pros and cons of manufacturing inhouse vs outsourcing to a new supplier.
Typical considerations include size of requirement, how important the part/project is to the overall business strategy, whether the business has the in-house expertise and/or capabilities (and if not, whether to invest in this to bring it in-house), a preference for multi-sourcing.
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