The COVID-19 pandemic has had a severe impact on the flow of goods globally, but industry experts say companies have options for making their supply chains more resilient.
At the annual Advanced Manufacturing & Logistics event presented Friday by Conexus Indiana and IBJ, panelists said companies that have better insight—or “visibility”—into their supply chains will be better positioned to weather the disruptions that will inevitably happen.
Panelist Jane Siegler, assistant professor of operations and supply chain management at Butler University, said most manufacturers don’t have a full picture of their entire supply chain. They know who their Tier 1 suppliers are, but they likely don’t know who supplies those Tier 1 suppliers, and so on down the line.
Siegler is involved in a Butler/Conexus project that is examining the supply chain networks of manufacturers in Indiana, with the goal of gaining insights that could strengthen the state’s manufacturing and logistics industries. Results of that study are scheduled to be released next month.
From raw materials to finished product, a manufacturing process may involve six or more tiers of suppliers. And a problem that affects one supplier will have ripple effects down the line.
Despite the name, a supply chain does not really resemble a chain, Siegler said.
“It’s not actually a chain. It’s usually never a straight line,” Siegler said. “It’s a complex web of relationships.”
As an example of that complexity: Subaru uses more than 18,000 parts to make each of its vehicles, and the company has more than 300 Tier 1 suppliers, said panelist Rachel Hazaray. Hazaray is deputy general counsel and senior manager of legal and compliance and corporate social responsibility at Subaru of Indiana Automotive in Lafayette.
A company that has more information about its own supply chain, Siegler said, will gain insights into where its various tiers of suppliers are located, the relative importance of each supplier and other data points.
“That will be very critical in making some decisions,” Siegler said.
If a company learns that the majority of its suppliers are based in one country, for instance, a disruption in that country could have a devastating effect on that company’s supply chain. In response, the company might decide to diversify by adding some suppliers in other parts of the world.
Building options and flexibility into one’s supply chain can also make it more resilient, said keynote speaker Chris Sultemeier, who served as Walmart’s executive vice president of logistics until his retirement in 2017.
Walmart has a fleet of 8,000 semi trucks and 55,000 trailers, Sultemeier said. But this private fleet delivers only about 20% of Walmart’s total goods, he said. For the other 80%, Walmart uses third-party drivers hired on the open market.
Sultemeier said this approach is an example of the flexibility, or “optionality,” that Walmart builds into its operations so that it can more readily respond to changing business conditions. “Having a multitude of suppliers, or several suppliers, I think, is critical.”
Companies can also consider making their supply network more local as a way of building resiliency, said panelist Harry Moser, founder and president of an organization called Reshoring Initiative. The organization aims to bring manufacturing jobs back to the U.S.
“We think the local solution is often the better choice,” Moser said.
In recent years, Moser said, events like Japan’s 2011 tsunami and rising manufacturing costs in China had companies already thinking about reshoring. But the pandemic greatly accelerated that trend.
Moser said reshoring activity brought 6,000 jobs back to the U.S. in 2010, but that number skyrocketed to 160,000 last year. It’s projected to increase to 200,000 jobs this year.