Among all the human calamity, COVID-19 also demonstrated in no uncertain terms that it is critical for manufacturing firms and other asset-intensive, multi-site enterprises to take steps to minimize supply chain disruption. While we may never see another COVID-scale health crisis in our lifetimes, we can assume there will be plenty of natural disasters, political upheaval, labor disputes, and other factors that will threaten the production and delivery of the components, consumables, and spare parts you need to keep your plant, store, or school operating efficiently.
SDI offers three supply chain management tactics you can employ for preventing and dealing with disruptions to your maintenance, repair, and operations (MRO) workflow.
1. Supplier Diversification
The admonition about putting all one’s eggs in one basket holds true for supply chain managers. Overreliance on a single supplier of butterfly valves – no matter how great its prices and service – could leave you scrambling if something goes wrong. Take time before disaster strikes to identify and contract with secondary suppliers.
Diversity does not simply mean redundancy, though that is a consideration. Engage vendors located in different areas of the country and regions of the world who can contribute to your critical spares inventory if your primary partner cannot deliver. For instance, if a hurricane knocks out your main supplier of neoprene gaskets in Miami, having a backup supplier based in Daytona may do you no good. It likely would be better to work with substitute vendors with facilities in Seattle, Toronto, and Guangzhou. This carries over to delivery and freight, as well. We all know too well what COVID-19 did to shipping from China. For domestic needs, consider diversifying to find rail, trucking, air, and barge alternatives.
2. Identify Critical Spares
All parts are not created equal, and you should not treat them that way. Create a class structure for your MRO materials based on two considerations: their role in keeping production flowing and the difficulty of replacing them. Where items fall on this matrix determines their criticality. For instance, your process may hinge on the performance of a dozen 3/8-inch metal screws. The failure of one screw shuts down all production until it can be replaced. But resupply is easy. Not only can hundreds of vendors deliver this SKU overnight, but a quick trip to the home improvement store also alleviates the problem in an hour. The screws meet only one of our two criteria, so they would not be considered critical. On the other hand, there may be limited supplies and long lead times for replacing a large component. But this part likewise shouldn’t rank as critical if you can maintain production and customer service in the short-term when your current part fails and the cost of carrying a spare in inventory is greater than the efficiency cost of doing without for a week or two.
Parts that do meet both criteria should receive the attention required for managing supply chain disruptions. When parts prove difficult to source – for older equipment for which OEMs no longer produce spares, for example – consider 3D scanning and reverse engineering specifications to cut down on the time to fabricate replacements.
3. Treat Supply Risk as Part of Enterprise Risk
Supply risk, like all operational risks, should be managed with an eye toward “keeping the lights on” to serve internal and external customers to minimize supply chain disruption. This requires the firm to identify possible sources of MRO logistics bottlenecks but also to commit to MRO supply chain management with the same vigor you manage financial and safety risks.
Companies often take on additional or unnecessary MRO supply chain risk, deeming it acceptable to achieve cost savings or other competitive advantages. In many cases, shouldering additional risk is warranted. The chance part failure or a supplier’s inability to meet demand may be so slight as to be worth the gamble. But this is only true if the company makes the decision with its eyes wide open. Too often, they take on additional risk without proper assessment of what’s at stake or the rewards they can reasonably expect.
With all the facts and percentages in hand, manufacturers and other organizations likely will deem single-supplier reliance too risky when it comes to critical parts. To maintain resiliency, approach supply chain risk from a strategic viewpoint, rather than a merely tactical one. That means developing plans for future contingencies as well as current conditions. It means overlaying potential capacity constraints, market opportunities, and integration possibilities and how these will affect and be affected by finance, marketing, IT, and other departments across the enterprise.
SDI offers a variety of off-the-shelf and customized solutions to help you minimize supply chain disruption by managing spare parts, establishing supplier relationships, and integrating the MRP supply chain with other critical business functions. Contact us to discuss your needs with our experts.