Global supply chain disruptions pose unique, unprecedented problems and opportunities for small manufacturers.
The problems are bigger for small manufacturers than large companies and the worst case is production disruption. At the very least, increasing costs lead to compressed margins or even outright losses; yet opportunities abound. Disruptions make small U.S manufacturers more valuable to big companies that are pivoting to domestic sourcing.
Supply chain risk management is the key to solving problems and seizing opportunities by becoming a trusted, resilient, responsive supplier.
A recent IMEC White Paper explains how to respond to supply chain disruption.
Effective risk management requires:
- Situational awareness — monitor supply chain inputs, in-factory processes, customer, and market outputs on a continuous, real-time basis. Make systems-based risk awareness and assessment the foundation of proactive risk management.
- Reshoring — Source domestically to improve reliability and trust and protect intellectual property (IP).
- Multi-sourcing — Minimize risks with increased optionality.
- Total Cost of Ownership (TCO) costing and pricing — look beyond unit price alone to include freight, tariffs, and time.
- Avoiding the Low-Cost Trap — Small manufacturers realize competing on cost per unit alone makes you replaceable, and thus isn’t sustainable. The crisis has made it clear that the same principle applies to suppliers. A TCO viewpoint refocuses purchasing from unit price alone to holistic value, incorporating comprehensive costs and risk.
- Supply Chain Network Mapping – Gain insight into exposures and opportunities by assessing your main suppliers and their The longer the chain, the more potential pain.
- Reevaluating Lean Manufacturing — Reassess the Just in Time (JIT) inventory risk/reward ratio.
- Investing in Customer and Supplier Relationships – Successful sourcing depends on Relationship Capital – the value of customer, supplier, and stakeholder relationships. Invest in strengthening relationships with reliable domestic suppliers to solve shortages.
- Exploring External Funding Availability – Seek funding from public and private sector incentive programs designed to help you with job retention and growth. Sources include direct subsidies from big companies to state grants and tax-exempt bonds. These programs help you invest in technology to pivot and retool to meet demand.
What IMEC Can Do for You:
The white paper outlines a wide array of IMEC resources to help Illinois manufacturers manage supply chain risk:
- Self-Assess your Supply Chain Risk Management profile and program stage.
- Align your supply chain with desired business outcomes.
- Find new sources and new customers.
- Build balanced supplier key performance indicator (KPI) scorecards.
In case you missed the recent webinar How Smaller Manufacturers Can Develop Risk Management Strategies for their Supply Chains, you can watch the recording here.
