Supply Chain Disruptions
Olga Pak, Ani Tekawade, September 2022
The past three years have proven to be exceptionally difficult for many businesses. At the onset of the COVID pandemic in 2020, as many as 630 US companies declared bankruptcy, the highest of the past decade (Irum 2021). Those who have barely survived continuously faced severe shortages of critical components and parts due to worldwide COVID-induced factory closures (Baker 2021). In today's time of significant uncertainty, the managers should continuously monitor the events by asking themselves, "In which environment do I operate?" This process of environmental scanning allows the company to track changes, identify threats and opportunities, and re-align business strategies to survive in an unfamiliar environment.
Anticipating potential disruptions, managers need to reconsider one of the core postulates of lean manufacturing that suggests that businesses should keep as little inventory on hand as possible. For decades, excess inventory has been considered wasteful, and the skill to keep production lines as 'waste-free' as possible has been an ultimate achievement and source of pride of any successful lean manufacturing manager. However, in today's world of uncertainty, when disruptions occur frequently and unexpectedly, this lack of buffer inventory can result in millions of dollars worth of lost future sales. The manager can reduce their risk of disruption and protect their production process by accumulating additional inventory that they would typically not need during normal, non-turbulent times.
Executives can reduce the risk of disruption by reducing the number of own suppliers. Supplier network typically consists of a vast web of Tier-1, Tier-2, and Tier-3 suppliers. Sometimes, the tiers extend beyond the third level making the supply chain so poorly visible to the original manufacturer that they no longer know who produces what and how. When one member of this complex supply chain gets disrupted, the whole supply chain falls apart as a result. Hence, the managers should focus on reducing the number of Tier-1 suppliers and working closely with them to seek efficient reduction of their own supplier network.
As a modern supply chains get more and more complex (e.g. Apple has as many as 608 first-tier suppliers just across China, Japan, US, and South Korea alone (O'Connor 2018), keeping the finger on the pulse of the surrounding environment by dealing with supplier relationship processes, product development, fulfillment, and customer relationships in a moment of crisis becomes a very stressful job.
Using data- and AI-driven supply chain solutions in environmental scanning and risk assessment, a firm can identify, address, and mitigate external environment risks in order to prevent potential disruptions. NumberSci brings to the table a unique skill set based on rich practical experience and extensive academic training to help supply chain managers make the most profitable decisions in risk modeling, identification, scoring, and prevention.