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Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

The supply chain is only as strong as its weakest link

20-Jun-2018
The supply chain is only as strong as its weakest link
A supply chain can only be strong if all its parts are working. But, with just one weak, broken or poorly fitted link – it’s likely to wreak havoc with everything, ranging from a manufacturer’s production, right down to their bottom line profits.

A great example of the havoc a broken supply chain can cause is one of the best-selling pickup trucks – the Ford F150. In May, a massive fire broke out at the Meridian Magnesium Ford factory in Eaton Rapids, Michigan. As a result, the factory was forced to cease all production processes for as many as six days. This caused Ford to halt production of its highly profitable F150. The markets then reacted immediately, meaning that Ford’s stock price fell by 2%, almost instantly.

The F150 sold 900,000 units last year and contributed over £31 billion in revenue to Ford. Six days in the life of F150 production could cost Ford as much as £512 million or more (based on their 2017 revenues); and as many as 7,600 workers had to stay home for the duration. This happened all because a single-sourced component in the supply chain was no longer available – breaking the chain and thus, halting the production process.

The chain broke. Most likely the problem arose because Ford did not know the part was single sourced or it made a bad trade-off of risk versus cost savings. Both problems stemmed from not understanding the ramifications of its actions.

The question then remains, what is the solution to ensuring a break-proof supply chain? Well, a combination of risk identification, mitigation and management is a good place to start. You can identify risk either as it happens or in advance through simulation.

To be able to identify a risk at the time it takes place, we must be able to analyse any current orders in the system, any future demand requirements and the supply locations that could be impacted by this risk.

Simulation identifies the impact of these same risk events without the actual risk taking place. This enables trade-offs like: “If I single source a component, what is the impact on my supply chain which allows for financial analysis?”

Management means taking action after an unacceptable level of risk in the supply chain arises, such as obtaining a back-up or secondary supplier for a critical component of a critical revenue product. The time it takes to respond is the most critical aspect - and automation is the key to responding faster and more effectively.

Mitigation is the act of identifying potential risks, the likelihood of the occurrence and the severity of the impact of the risk occurrence.

In order to break-proof the supply chain, businesses must utilise all of the aforementioned techniques and be able to use one single platform to keep track of all these aspects. In doing so, it becomes much simpler for stakeholders to collaborate and support the businesses. Ultimately, business leaders and decision makers are then able to make more informed decisions across the organisation.

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