Supply chains have evolved as an efficient way to source raw materials and parts from the most cost-effective global sources for the manufacture of final products. To date, they have not focused on resiliency, visibility, or redundancy; instead, the goal has been to deliver speed and quality at the lowest cost.
The supply chain disruptions caused by the COVID-19 pandemic are causing many Americans to question the exclusive focus on price point in sourcing and to examine the value of adding greater resiliency and visibility into the supply chain. Several industry stakeholders are outlining scenarios in which the price of final products does not necessarily increase. A recent AMT whitepaper reviews current approaches to this challenge.
One strategic approach is to apply risk management principles to all Tier 1 and 2 suppliers in the supply chain to monitor and mitigate risk and be able to identify alternate suppliers. Advanced analytics and artificial intelligence (AI) functionality have made supply chain monitoring and mapping applications more affordable, and applications can provide advanced notice of potential disruptions to product lines, giving companies time to react and mitigate supply shortages. Companies that provide applications in these areas include Resilinc, a supply-chain-mapping company; Elementum, which provides supply chain incident management solutions; and Llamasoft, a provider of AI-powered supply chain analytics software.
Blockchain technology, which is not owned by any single company, enables manufacturers to exchange data and track transactions within supply chains. Because blockchain can provide an immutable and permanent digital record of materials, parts, and products, it provides end-to-end visibility and a single source of truth to participants. The launch of blockchain as a service (BaaS) is a cost-effective option. Players in the BaaS space include Microsoft, Amazon, R3, and PayStand.
Technology is also enabling new business models that change the manufacturing sourcing paradigm and increase its resiliency. Xometry, for example, provides manufacturing as a service (MaaS), enabling cost-effective and efficient sourcing of manufactured parts. Its software platform enables customers to instantly access the manufacturing capacity of a network of over 4,000 manufacturing facilities and receive instant pricing, expected lead times, and manufacturability feedback.
Some argue that the existing supply chain paradigm can benefit from a greater focus on strategy, not technology solutions alone. Original equipment manufacturers (OEMs) do not usually address supply chain risk reduction because compensation is tied to the price of company stock, which increases as supplier piece prices go down. A more holistic approach is making the supply chain “lean” through strategic analysis and supplier development activities, and thus more responsive to market demands, reducing OEMs’ reliance on finished good inventory. This can have a more positive impact on financial results than a focus on piece price alone.
In conclusion, U.S. manufacturers have choices about the future resiliency of their supply chains, as does the public sector. The pandemic has made clear the critical role that manufacturing supply chains play in ensuring U.S. national security, whether in terms of adequate medical supplies or any other scarce resource. The challenge is not too great to overcome.