The COVID-19 pandemic has highlighted the world’s lack of readiness to manage through a global supply chain crisis and the need for digital supply chain management strategies that reduce our reliance on off-shore suppliers for crucial parts, components and materials. While MRO was historically neglected area in many organizations, it has proven to be an essential supply chain during this global crisis, especially for continuity of supply of PPE materials.
In a typical scenario, organizations expedite parts and critical spares from suppliers at a premium cost or find alternative options. This time it’s different, because the COVID-19 pandemic disrupted supply chains on a global level. Dependence on overseas manufacturers coupled with logjams at domestic docks, worker shortages and extended shipping times, are forcing companies to be more deliberate about their digital supply chain strategy to mitigate risk and secure the MRO and PPE supplies they need to see them through the crisis.
The Digital Supply Chain Strategy: Then and Now
Suppliers’ pre-COVID ability to deliver just-in-time materials and 24-hour shipping had reduced the need for manufacturers to carry large stocks of replacement parts and maintenance materials. The shift to very lean and highly efficient global supply chains during a global pandemic means what used to be two-day fulfillment times became lead times of two weeks or more, which could be detrimental to business especially in the case of critical spares.
Procurement and supply chain professionals need to think longer-term about their digital supply chain management strategies and include equipment maintenance and repair as they make decisions to guide their companies through the pandemic and mitigate the risk of future demand and supply shocks. What should organizations and supply chain professionals be thinking about and what are some ways to mitigate the risk?
Strategic Risk Mitigation
First, organizations need to identify the risks the virus poses to supply chain continuity, from sourcing and procurement to receiving and handling inventory, to assuring quality and paying for supplies. Spend transparency and MRO data management allow firms to assess long-term demand so they can extrapolate order times and make arrangements for alternate sources if current suppliers cannot meet their needs.
Second, companies that have gotten by with a “break and fix” maintenance and repair strategy need a more proactive digital supply chain strategy. Preventative and predictive maintenance that maximizes equipment uptime and reduces the need for emergency parts replacement will be crucial during any resurgence or future outbreaks. Organizations can implement policies that emphasize reusing and refurbishing components rather than discarding and replacing them. Plants should consider retrofitting machines to reduce their reliance on customized critical parts. Machines that use interchangeable, off-the-shelf parts will experience less impact from the depressed business climate and can share limited inventories across facility locations.
Third, consider the country of origin of your MRO supplies. Even if procurement organizations typically purchase spare parts from domestic distributors, those distributors may not be able to obtain parts from OEMs based in Asia or Europe. To compensate for expected delivery delays, organizations may want to increase minimum order quantities, accelerate reorder trigger points and keep a higher level of safety stock for critical SKUs. Organizations are responding by staffing warehouses and storerooms at all times and locking away high-demand items. Additionally, smart point-of-use vending systems that track usage by department and individual employees have been shown to reduce consumption by as much as 30 percent.
Finally, finding and procuring critical supplies during a global supply chain disruption may require organizations to use unorthodox methods. Some companies temporarily delegated purchase authority to additional employees, loosened controls and approval processes. While others searched out sourcing options previously not considered – online marketplaces, machinery repair and refurbishing houses and used equipment dealers.
Ensure Your Organization’s Future
MRO is no stranger to upheaval. In the last 20 years, the industry has overcome challenges presented by Y2K, 9/11, SARS, man-made disasters and natural phenomena. The current pandemic affects businesses on a global scale and has the potential to last months. Contact SDI today to learn how a thoughtful and planned MRO digital supply chain strategy can help ensure your company survives the coronavirus pandemic.