How Covid 19 is reshaping supply chains

Using the tools and techniques discussed during this module you are to write an essay which addresses the case of the Global semiconductor shortage below and fully answers the three questions posed. The essay should be 3000 words (+/- 10%) in length. The word count does not include tables, figures, appendices or reference section.

 

Case Study:

Read the article “How Covid 19 is reshaping supply chains” by McKinsey.  The article discusses a survey on building supply chain resilience in response to Covid-19.  The article mentions that “our survey revealed significant shifts in footprint strategy. Last year, most companies planned to pull multiple levers in their efforts to improve supply-chain resilience, combining increases in the inventory of critical products, components, and materials with efforts to diversify supply bases while localizing or regionalizing supply and production networks. In practice, companies were much more likely than expected to increase inventories, and much less likely either to diversify supply bases (with raw-material supply being a notable exception) or to implement nearshoring or regionalization strategies”. Imagine you are the Chief Operating Officer of Flex Ltd., previously known as Flextronics International Ltd. or Flextronics) an American Singaporean-domiciled multinational electronics contract manufacturer. It is the third largest global electronics manufacturing services (EMS) original design manufacturer (ODM) company by revenue, behind only Pegatron#

 

1a) What supply chain strategies would you recommend that Flex Ltd. follows to build resilience in the context of Covid 19? Please justify your answer

 

1b) What are the benefits and drawbacks of your strategy and what potential obstacles would you need to overcome in implementing your strategy?   Please justify your answer

1c) How would you convince Flex Ltd. Board of Director’s to implement your proposed recommendations, and roughly how long would it take to put your strategy in place?

The essay will be assessed on the basis of five criteria:

 

1.Structure, presentation of essay and clarity of expression – A clear, professional, well presented and structured essay (20% of total mark)

2.Statement of the Operations Problem/Opportunity – A Clear demonstration of a well-developed, critical and comprehensive understanding of key operations process, management and performance issues (10% of total mark)

3.Analysis of the Operations Problem/Opportunity–  A demonstrated degree of competence in the application of the tools and techniques of operations management to the pertinent problem/opportunity (40% of total mark)

4.Recommendations for improvement – a demonstrated degree of competence in providing clear workable recommendations with explanations of relative merits, tradeoffs and constraints (20% of total mark).

5.Timeline for implementation of recommendations – A clear and concise discussion of the proposed implementation plan, with detailed listing of potential barriers to the success of implementation (10% of total mark).

 

The author and date of the source (Handfield et al. 2003) should be included in the body of your discussion whenever specific ideas, arguments, models, and/or information are used in your discussion

Answer

Introduction

Constant crises in the business environment necessitated supply chain resilience for most companies. Crises like the Brexit scenario, sanctions in Russia and China forced organizations to strategize how they conduct business with a more diverse supply chain. Several supply chain strategies help build resilience in the industry, while mitigating certain circumstances. Organizations need resilient measures to ensure a robust supply network to sustain them through a season. The COVID 19 pandemic season of 2019/2020 forced most companies to make it a sustainable habit for the organizations to develop new resilience strategies. Supply chain strategies are all about innovation and accepting new ideas to help the company maintain its overhead and turnover for the year ended of business.

The pandemic forced businesses to revamp their outlook on business premises for sustainability. Businesses suffered when the COVID 19 hit, and many were forced to improvise their supply chain networks. In any healthy business environment, the networks of suppliers, manufacturers, insurance and customers are crucial. These networks give the business the security required when handling new companies for the long term (Belhadi et al., 2021). As such, there should be strategic steps that enable a company to revitalize new supply chain links to mitigate a loss or certain inequities (Dolgui and Ivanov, 2020). Development of alternative supply chain strategies for companies will enable them to continue with their business operations despite the shortfalls posed by COVID 19 pandemic across the globe.

Resilient Supply Chain Strategies

To establish supply chain resilience, Flex ltd should adopt different strategies that are often for the benefit of the business in the long term. The COVID 19 pandemic, just like any crisis, exposed the supply chain flows of businesses (Dolgui and Ivanov, 2020). Looking at their initial supply chain model, their linear model is always standard for the company, and pre-covid was smooth, but adjustment needed to be made. Flex ltd should see the cost of retaining multiple supply locations as a means of doing business instead of an insufficiency.

First, having inventory buffers helps mitigate the shortage of supply. The main problem with Flex ltd is that with a global need for copper, they lack the materials to complete making electronics (Hosseini, Ivanov and Dolgui, 2019). They can’t ship unfinished products since negative market reviews only make the business reputation poor. With buffers like contracting junkyards worldwide to specifically sell their copper wires can help cover the missing supply chain buffers as such yards are like multiple supply centres of a product which is a prerequisite for any company having the capacity to handle many products and goods. The real shortage of copper wires should give them a reason to explore new areas of a possible acquisition, as it’s often challenging to maintain a steady supply.

Secondly, the company should engage in manufacturing network diversification whereby Flex ltd can have multiple manufacturing locations to maintain a solid supply chain. The disruptions of sanctions, politics, and the pandemic can all be mitigated when there are diverse manufacturing areas (Belhadi et al., 2021). This also creates a new supply chain route with various suppliers, customers and regulations. Maintaining multiple manufacturing bases is an added expense in the business but is seen as a necessity.

Thirdly is to make use of multisourcing strategy that will enable the organization to make up for losses. COVID 19 exposed the inefficiency in supply chain issues, especially in the manufacturing sector. Most companies like Flex ltd depend on one supply source for their products (Ivanov and Dolgui, 2020). Having a diverse supply source should also be strategic. Each supply source as well as their networks of how they get the product and quality should be known to Flex ltd. The sourcing suppliers should also be categorized on impact and how they drive the agenda of Flex ltd as an electronics manufacturer with different product measures.

Lastly, the company should aim at having a reliable ecosystem partnership with other electronic manufacturers to help build a network of companies coexisting to supply complete electronics. Since the company is domiciled, the financial incentive to maintain multiple locations and stores might be an extra expense (Ivanov and Dolgui, 2020). The company is also supposed to handle partnerships that are mutually beneficial to supply resilience and keep up with the demand in the market.

Benefits and drawbacks of the strategies

Each strategy contains various advantages as they ensure a constant supply of raw materials necessary for the business activities. Inventory buffers play a crucial role in the company’s supply chain strategy. A company with inventory buffers ensures the material flows in time, especially with the speed at which the company requires manufacturing. Assembling electronics using different suppliers but with a more measured handle on the product helps showcase a more reliable way of handling the process (Namdar, Li, Sawhney and Pradhan, 2017). Additionally, a supply buffer offers security for the company to provide the right services required of the company. Multiple centres also give the company numerous sources of getting products and supply excesses for business. In case of a problem like the sudden pandemic shutting down most of the world’s supply chain, there can be an alternative to work with. However, one major drawback of such buffers is that it increases the cost of production as resources have to be allocated in the management of such buffers which consequently eats in the company’s profit margins.

The advantage of diversifying the manufacturing network is also similar to inventory buffers. Having more than one manufacturing location helps showcase a more reliable and realistic way to spread the investment (Pettit, Croxton and Fiksel, 2019). Diversification of Flex ltd electronics manufacturer having different warehouses, supply networks and customers to complete the supply chain enables the company to have ready products in different locations for their customers. The other benefit of having multiple manufacturing points is that it helps to develop a complex supply strategy that enables the overall provision of the process. However, one major drawback is that the diversification strategy increases operational costs for a company as more employees will need to be hired to manage the multiple manufacturing points

The implementation of artificial intelligence in the supply chain revolutionized the industry and is a major supply chain strategy that Flex Ltd can adopt. The expectation was automation within the supply chain management, which further increased business productivity (Pettit, Croxton and Fiksel, 2019). Combining the two high technology applications enables the transportation systems to bring zero errors and faster customer service. Automation and artificial intelligence enable the goods to be sorted, labelled, and categorized in their various delivery destinations and conveniently arranged for delivery. The calibration efficiency is due to many iterations with machine intelligence and ensuring that the parameters for the technology conveniently cover the error-prone areas that human beings are susceptible to (Pettit, Croxton and Fiksel, 2019). The agility and accuracy it performs in the business are unprecedented since it requires faith-based systems of efficiency to give customers the right combination of data and goods that are accurately tailored to their consumer needs. However, a major challenge/drawback of using artificial intelligence is that it does not encourage creativity that is often associated with humans and the cost of implementation is also high.

Obstacles to Overcome in Implementing the Strategy

One of the major obstacles in the implementation of the proposed supply hain strategies is in regards to costs. Due to the negative financial effects of COVID 19, many businesses are struggling to stay afloat as the income of potential customers was significantly affected thus reducing their purchasing power. Consequently, the reduced purchasing power reduced sales for companies thus, such strategies that require intensive capital to implement may not be realizable.

Another major obstacle is in regards to restrictions that have been put in place by different countries amidst the wake of COVID 19 pandemic. These restrictions will pose a major challenge to the implementation process as some restrictions are discouraging travels and movement of goods in the now famed, “red zones” across the globe.

Supply Disruptions

When COVID 19 hit its peak in 2020, massive business operations were affected, and the global economy came to a standstill. Moreover, the supply chain was affected since goods could not move to their destination due to travel restrictions. The world was unprepared for the disruption as most business models depended on the supply chain model of receiving goods from suppliers and using them before paying at a premium rate within 90 days. The goods in transit were always through air or water transport which were massively developed over the years to connect businesses worldwide (Pires Ribeiro and Barbosa-Povoa, 2018). The pandemic also disrupted the business quota system, which companies depended on to get paid, earn interests, and reward their employees.

Resilience and Recovery

Resilience requires two critical capabilities; the capability for recovery and resistance. The supply chain resistance is its ability to delay any disruptions and reduce the interruption impact, while the recovery capability is the supply chain’s ability to recover from any disturbances (Pettit, Croxton and Fiksel, 2019). Businesses ought to adapt to the new norm and develop more robust supply chain models, and the best one is the lean manufacturing strategy. Toyota, Apple, and Boeing used this supply chain model to ensure their supply chain diversification. For instance, Apple products are developed by different manufacturers whereby some companies make the iPhone body and the operating system while the supply chain assembles the parts at the factories in China. This is a stop-gap measure against any operational disruption that may render the products redundant.

The recovery stage after the pandemic always determines which businesses would prosper and which ones would fail. For instance, the 2011 Japanese earthquake disaster affected both Toyota and Nissan’s supply chain, whose suppliers were battered by the disaster (Pires Ribeiro and Barbosa-Povoa, 2018). However, the difference between the two companies was the recovery capabilities of their supply chains. Nissan was able to recover since they used alternative suppliers for their short-term fall, helping them regain market share quickly. Companies are always supposed to have alternatives to their supply chain to ensure they get the right combination of prospects and business opportunities outside their regular operating jurisdictions. Moreover, a resistive and recoverable supply chain model helps save costs and the company operations through transitions. However, the business still trades in the new markets, and with globalization, the business opportunities become more competitive and open to any company willing to work and benefit (Pires Ribeiro and Barbosa-Povoa, 2018). Similarly, Flex should adopt such models that guarantee resiliency amidst disaster.

Risk Barometer

The risk barometer highlights the different disaster levels that guarantee a business loss, with the highest risks being natural calamities, political unrest, or cyber-attacks. With cyber-attacks, systems are always crippled, and the result is still a shutdown in business. Hedge funds are adversely affected when online strategies are down since they usually trade the stock market using algorithms (Pires Ribeiro and Barbosa-Povoa, 2018). However, an alternative means to earn an income is selling penny stocks. These are paper stocks that are not affected by online attacks and can save millions without losing too much money. Similarly, Flex must develop alternative means of supply chain development to help its business recovery and reinvestment since the pandemic’s sudden effect on the world caught businesses by surprise. It led to massive loss of business, livelihoods, and lives.

Implementing the Recommendations

The timeline for implementing supply chain strategies takes a minimum of 6 months to 1 year as this is the time for setting up processes and supply chain points. A supply point forms the premise of setting up different ways of having a complex supply chain taking electronics from all the points and distribution towards all customers (Pires Ribeiro and Barbosa-Povoa, 2018). To implement the recommendations, Flex Ltd should adopt measures and strategies that ensure that there are no disruptions in the supply chain processes. Mergers, partnerships and acquisitions can be one of the major considerations for the company. The strategies are comparable with other reputable companies which, upon implementation, there has been a steady change in the business flow. This may convince the management to implement the strategies, but a gradual implementation of the process helps to showcase a more realistic way of handling new supply chain processes.

As a manufacturing entity, there should be different points in which the company can create awareness to the consumers of other branches. The supply chain resilience is crucial in times of pandemics and crisis, with fail-safes that can only have suitable supply provisions. The supply chain management regulates the right direction in which the product flows, and Flex ltd is solely concentrating on manufacturing electronics for the market (Pires Ribeiro and Barbosa-Povoa, 2018). As such, there should be a niche product to show how well the supply is handled for the process. Also, the management should be able to identify proper measures with regulation by applying the three-step model to implement the supply chain. The manufacturing sector entails a long-term strategy with the supply process where poor inventory control is addressed.

Using artificial intelligence

Artificial intelligence in the supply chain is the best way to address supply chain issues since the technology eases the process through iteration. This implementation takes time since the right technology should be handled at the right time. Flex ltd makes the supply chain process more realistic by looking at the economic setup of the country and gaining on the right direction in which the process is done. Electronics distribution, especially with the proper diversification, can easily be automated when Internet of Things (IoT) and artificial intelligence (AI) collaborate. Developing the right AI for robust supply chain management takes time (Sá, Miguel, Brito and Pereira, 2019). The appropriate form of the proper avenues helps in the implementation and there should be avenues through which the management manages to have a more reliable way to handle the supply chain resilience.

AI is an integral part of the implementation of system logistics since the algorithms make it essential for the proper formation of the process. As such, Flex should have a more realistic view on how to handle new systems, which would show how well the supply chain meshed with artificial intelligence and help resolve the supply issue. For instance, machine learning implements steps on how products can be sorted according to quality, location, and need of the parts. The manufactured parts can also be linked to the geographical region, showing how well the process was handled for the long term and Flex should adopt this strategy. The long-term effect of artificial intelligence is the development of a complex system that helps in having logistical solutions to the distribution of products that belong to Flex ltd.

In a pandemic era, various cost-effective measures may prove beneficial to the company. There should be a realistic way to handle the process for the long term and give the company a more practical system to distribute the products (Sá, Miguel, Brito and Pereira, 2019). The costs of stock should be a priority to ensure that products supply to customers is not interrupted despite the challenges in the wake of COVID 19 pandemic. The expected growth in demand should also be met with the corresponding anticipation of the stock as the proper formation of systems shows a more realistic way of handling the store in the long term. Flex ltd implementation process is also hinged on having more people gain towards a long-term provision and strategy for the proper supply chain management process.

Lean manufacturing technique

Lean manufacturing aims at maximizing productivity while minimizing wastage in a manufacturing company within its production process (Wilson, 2015). This implementation model can work with lean synchronization, as it shows a more realistic way of handling supply chain process. Similarly, Flex Ltd should adopt lean synchronization process by ensuring that the response time from their suppliers as well as the customers is reduced significantly. During the pandemic, the supply chain can be implemented through performance metrics that show the value stream alignment of the process. Lean synchronization is also used to fasten the implementation process, and it often reveals how well the process can spread and benefit the company. As a multinational company, Flex should be concerned with the breaking of the supply chain. This can also be transformed from a traditional system to a more cloud-based and advanced design. Amazon used this model to implement most of its services, and it is not the most significant single distributor of most products in the world. They own the value chain and multisource supply chain with a complex AI to show distribution power thus reducing response time in regards to supply chain. Having the geolocation of products and sending them using outsourced companies helps maintain the proper formation. It might be expensive to keep, but it is necessary to distribute Flex ltd products exclusively and with convenience.

The Kanban system

The Kanban system is a visual representation of what activities are currently for the purposes of inventory control. The process enables the identification of bottleneck operations to ensure that a product moves through the production process conveniently with ease and at optimal speeds (Vatalaro & Taylor, 2005). As such, Flex should adopt the Kanban system and identify all bottlenecks in its production process and in the inventory control process. management, there should be a complex system to show how well the process goes. Since the Kanban system uses the just-in-time manufacturing system, Flex ltd will be able to track the production process, order materials on time to ensure continuity of the production process and thus reduce the build up of excess stock within the production process.

Conclusion

COVID 19 pandemic changed the supply chain management as it disrupted the supply chain process significantly. However, the disruption was a learning phase for companies to adopt convenient strategies to manage their supply chain and ensure that the production process runs smoothly amidst a pandemic. Flex Ltd can also utilize such strategies as lean manufacturing and synchronization, Kanban system and the use of AI services to manage the supply chain and ensure that the operations of the company and the supply of products to consumers runs smoothly and uninterrupted. Additionally, having various supply chain outlets located in different locations across the globe has proved to be an effective way of ensuring the continuity of the production process for companies. This is due to the fact that many countries have developed their own measures and restrictions in regards to travels which has significantly affected the supply chain process for companies. However, the adoption of better supply chain management strategies will ensure a smooth running of business for Flex Ltd thus give it a competitive edge in the market.

References

Belhadi, A., Kamble, S., Jabbour, C., Gunasekaran, A., Ndubisi, N. and Venkatesh, M., 2021. Manufacturing and service supply chain resilience to the COVID-19 outbreak: Lessons learned from the automobile and airline industries. Technological Forecasting and Social Change, 163, p.120447.

Dolgui, A. and Ivanov, D., 2020. Exploring supply chain structural dynamics: New disruptive technologies and disruption risks. International Journal of Production Economics, 229, p.107886.

Hosseini, S., Ivanov, D. and Dolgui, A., 2019. Review of quantitative methods for supply chain resilience analysis. Transportation Research Part E: Logistics and Transportation Review, 125, pp.285-307.

Ivanov, D. and Dolgui, A., 2018. Low-Certainty-Need (LCN) supply chains: a new perspective in managing disruption risks and resilience. International Journal of Production Research, 57(15-16), pp.5119-5136.

Ivanov, D. and Dolgui, A., 2020. A digital supply chain twin for managing the disruption risks and resilience in the era of Industry 4.0. Production Planning & Control, 32(9), pp.775-788.

Namdar, J., Li, X., Sawhney, R. and Pradhan, N., 2017. Supply chain resilience for single and multiple sourcing in the presence of disruption risks. International Journal of Production Research, 56(6), pp.2339-2360.

Pettit, T., Croxton, K. and Fiksel, J., 2019. The Evolution of Resilience in Supply Chain Management: A Retrospective on Ensuring Supply Chain Resilience. Journal of Business Logistics, 40(1), pp.56-65.

Pires Ribeiro, J. and Barbosa-Povoa, A., 2018. Supply Chain Resilience: Definitions and quantitative modelling approaches – A literature review. Computers & Industrial Engineering, 115, pp.109-122.

Sá, M., Miguel, P., Brito, R. and Pereira, S., 2019. Supply chain resilience: the whole is not the sum of the parts. International Journal of Operations & Production Management, 40(1), pp.92-115.

Shashi, Centobelli, P., Cerchione, R. and Ertz, M., 2019. Managing supply chain resilience to pursue business and environmental strategies. Business Strategy and the Environment, 29(3), pp.1215-1246.

Vatalaro, J. C., & Taylor, R. E. (2005). Implementing a mixed model Kanban system the lean replenishment technique for pull production. New York, NY, Productivity Press.

Wilson, L. (2015). How to implement lean manufacturing. New York, New York: McGraw-Hill Education.

 

 

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