Did Your Supply Chain Crumble During COVID-19?
Chris Haydon, president of SAP Procurement Solutions, provides insights into action items manufacturers can take to close supply chain inadequacies.
The supply chain-based stories that ended up as headlines throughout the pandemic response made it pretty clear – it’s time for manufacturers to reassess how they address supply chain management. Whether manufacturers are dealing with a geopolitical issue or a health-related pandemic, the need to regularly refactor supply chains is the new norm. "It started, probably more as a trend, as we dealt with some of the trade negotiations that were coming out last year," says Chris Haydon, president, SAP Procurement Solutions. "However, with the impact of COVID-19, it reinforces and accelerates the need for strategic action."
Fortunately, strategically expanding the digitalization efforts driving other manufacturing trends can play a pivotal role in helping address supply chain issues. Haydon tells IndustryWeek, the visibility and the agility needed today is moving and accelerating towards manufacturers valuing digital networks. "This is true whether the problem is within the physical network used to buy and sell materials, the logistical network orchestrating the delivery of materials or the need to better assess the performance and risk of the supply chain," he says. "These are all areas where the use of digitalization technology is dramatically accelerating."
Understanding Next Steps
Remapping as needed.
The key here is to critically look at supply chains for new dimensions of risk. Supply chains were not fully understood or tested for something like COVID-19. Or even in some industries where strained trade relations and tariff negotiations created havoc. This is not just a USA phenomenon, it's global.
Finding talent continuity.
"How do manufacturers get workers to get the work done? There's a degree of obviously unfortunate rising unemployment, but the reality is as the supply chains come back, you're going to need the talent to still make the supply chains run," he says. "People are looking very carefully at the talent pools for people with the skills needed to run the supply chain. How can they be very creative in balancing full time equivalent versus temporary (contingent workers) to let them have agility and responsiveness, in manufacturing."
"When someone is providing critical supplies, manufacturers need a firm understanding of business continuity of their suppliers as well as the supplier's suppliers. It is a crucial mistake if you're not actively looking further down the chain to understand your true risk is. It is the associated dependency that unfortunately can collapse or may not be able to supply in this environment," he says.
Understanding new dependencies.
"In manufacturing, most people want to talk about the direct materials influencing cost of goods sold the most right, but manufacturers also need to understand is that there are now some indirect items like personal safety equipment that has now become direct. What if you cannot get the goggles and masks needed to operate your paper plant? There is a notion of indirect materials, and potentially services becoming direct. How you need to manage them, how you need to inspect them, and treat them. That's changing and requires a very different, different approach.
There has certainly been a heightened sense of finding new sources of supply in areas where a business can have a network effect or where it can bring to bear new sources of supply it is certainly shining a light on issues that might have been taken for granted, explains Haydon.
“Visibility is crucial,” he says. “How do we look at the supply chain continuity – taking the pulse not just internal employees, but the pulse of your suppliers and how those suppliers are doing. For instance, can they supply this week but just as importantly where will they be in six weeks’ time?”
However, real success is not just about the tool. Haydon shared an example where Heath Layfield, chief digital officer of Ram Tool Construction Supply, an Alabama-based construction company, needed to quickly find a supplier with 500 hospital beds for its customer building a temporary hospital outside NYC to treat COVID-19 patients. With help from SAP and SAP Ariba Discovery, Ram Tool was able to find and connect with a new supplier, Joerns Healthcare, who was able to fulfil the sourcing need for 500 hospital beds – all in 30 minutes.
“It is powerful when the people relationship network intersects with the digital network to make the difference,” he says. “It humanizes the benefits of digitizing everything.”