While the pandemic slowly disappears, supply chain challenges increase

Now that corona is here to stay in our system, we are slowly picking up our old habits. We enjoy full cafes and terraces again and find ourselves more often in traffic jams going to the office. We are also (fortunately) seeing work increasing again in many areas and logistics personnel at all levels are becoming scarce. This together with the current geopolitical situation is putting enormous pressure on our existing supply chains. It also costs a lot of energy in the service supply chain to deliver materials at the right time and place to prevent assets from coming to a standstill.

Interventions are required for more robust supply chains

The need for raw materials and semi-finished products has grown strongly in the last three months. This has already led to longer delivery times in the supply chain. The new geopolitical situation creates additional complexity due to restrictions on the delivery of raw materials and the decrease in transport capacity. I notice that the focus within maintenance organizations is increasingly shifting to solving stock-outs in order to prevent systems downtime. However, this consumes time and energy from the supply chain organization and only has a limited effect. After all, the stock-out has already taken place and open purchase orders are almost impossible to accelerate in the current market. This is typical of supply chains that are no longer robust and whose redesign has been delayed for too long. All the more reason for targeted actions and interventions in the supply chain.

Distinguish between structural redesign and improvements with rapid effect

A structural redesign of the supply chain involves a number of essential steps:

  • Determine current and future organizational strategy
  • Ensure that the supply chain design supports the future organizational strategy
  • Define the functions of the different tiers in the supply chain
  • Decide on stock allocation in the supply chain (assortment decisions)
  • Choose an efficient replenishment method (also reconsider sourcing strategy)
  • Then calculate the impact of alternatives in terms of desired service levels and costs

These are important steps that need to be taken, but require time and capacity that is often not available at the moment. It is therefore important, in addition to these longer-term actions, to start with improvements that have a rapid positive effect. The intervention with the most positive effect on service levels and costs is to improve material forecast of the expected material usage and share this with suppliers in a structural frequent manner.

Share forecast and delivery schedules for long lead items
It is beneficial to both buyer and supplier to share and discuss structural forecast and delivery schedules for items with long lead times. Such a forecast can be built based on historical information about unplanned maintenance and planned maintenance activities. A professional spare part management software suite can provide good support to come to the right forecast methodology (for more information check Lanza). Calculating forecast information requires continuous and dedicated attention from supply chain experts. This forecast must be periodically updated and shared with suppliers so that they can align their production capacity and produce in a continuous flow.

Define rules together that lead to a win-win situation

In the above-mentioned form of cooperation, it is important to explore the win-win situation for both parties. As a customer, flexibility is key and therefore it is desired to be able to deviate from the shared forecast figures. While a supplier is not always satisfied with forecast figures without any commitment and which can be changed in a final stage. That is why it is so important for both parties to agree on the rules of the game regarding the purchase commitment of the forecasted materials.

For example, you can agree on expected bandwidths or a horizon within which hard purchasing obligations have been issued. These rules of the game should lead to a win-win for both and ensure a critical look at the forecasted quantities.

This rapid intervention in the working method with suppliers results in a more controlled supply chain in the short term. Parallel to the short-term actions, attention must be paid to the structural review and redesign of the service supply chain. I am curious about your first step towards a robust service supply chain.

If you need help, or want to share ideas, my colleagues and I are happy to think along with you.

Get in touch

Rutger Vlasblom
Senior Consultant
E-mail us