Covid-19 is a profound event that will have a lasting effect on the way that manufacturers, suppliers and partners operate moving forward. It’s not the first unexpected event to impact the supply chain; OEMs and their supply chain partners successfully navigated their way through the 2018 materials shortage, as well as the Japanese tsunami and Thailand floods in 2011. The uniqueness of the pandemic is that it continues to emerge in different regions, creating a highly dynamic situation that impacts both business continuity and the health and safety of individual workers, wherever it arises.
When the virus first hit Asia at the end of 2019 and then Europe and North America in early February 2020, day-to-day supply chain activities were thrown into turmoil. Regional lockdowns and grounded flights stretched the delivery of materials from 5 to 15 calendar days in suppliers’ manufacturing lead times. For the first few months, freight capacity to deliver materials was literally cut in half. OEMs had to pay steep freight premiums to get materials and products delivered in time. EMS providers with strong supplier relationships found workarounds to get parts during the early months of the pandemic but were subsequently impacted by reduced customer demand as regional lockdowns unfolded.
Improving Supply Chain Resiliency
The pandemic has presented an opportunity to re-evaluate the old way of working – linear supply chain planning and forecasting, a sole focus on cost, ‘just in time’ inventory models and siloed business practices – to determine how the supply chain can work differently to most effectively meet sourcing challenges in the future. Aspects to consider that could improve the resiliency of supply chains include:
Closer collaboration. In the past, various organizations in the supply chain have worked in too much of a vacuum. OEMs that can work closely with partners, suppliers and their own customers will win in the future. These embedded relationships facilitate faster decision-making that take into account multiple factors during scenario planning exercises that can buffer the negative impact of unexpected events.
During the height of the pandemic, Sanmina had weekly calls with suppliers to reserve capacity for components, so that the parts could be shipped earlier in order to meet production requirements. Our suppliers understood our needs and the importance of delivering parts so that we could deliver what our customers required. Throughout the most critical times of the pandemic, they were able to meet our demand fluctuations.