Making Your Spare Parts Supply Chain More Resilient with Digital Manufacturing
Technical Focus | 31 March 2020
The word “resilience” is used in several fields, such as psychology, ecology, and business management.
In the business setting, the level of a company’s supply chain resilience depends on how fast a company can bounce back from disruptions of supply chain or resume its original level of performance prior to the disruptions. Although managers and researchers agree on the importance of supply chain resilience, there is often lack of consensus when it comes to how to make a supply chain resilient or how to prepare and implement preemptive measures to ensure that the supply chain is not disrupted or mitigate the effects of disruptions as much as possible.
Corporations across different industries have discussed and invested in different methods to make their supply chain more resilient since disruption of supply chain not only interrupts a firm’s operation but also results in significant financial loss. In 2011, Toyota was hugely affected by the unexpected earthquake and the subsequent tsunami as three of the factories were in the affected region, resulting in a decrease in its quarterly profit by 75%.
Although Nissan and Toyota had similar supply chain networks at the time, Nissan’s supply chain was more resilient than that of Toyota as it was able to access alternative suppliers and recover the lost market share sooner than Toyota.
Likewise, the recent outbreak of COVID-19 has greatly affected the global supply chain as China, often considered the world’s factory, suffered from the pandemic.
Factories in China were shut down for a while and travels between cities were strictly monitored or even closed, making global manufacturers worry that they might fail to meet their contractual obligations. Production in China is recovering slowly as it takes time for manufacturers to implement the appropriate safety measure, source parts or components from lower-tier suppliers who might also be facing operating issues caused by COVID-19, and recover its original productivity as workers might still be trapped in confinement.
As the world becomes even more dynamic and unpredictable, businesses must understand that having a resilient supply chain can not only help them survive disruption but also position themselves better than the competitors in challenging times.
How do manufacturers make their supply chains resilient?
Mapping and Monitoring
Mapping out global suppliers and monitoring them are essential to achieving a resilient supply chain. Manufacturers that have mapped out the global suppliers will always be aware of where the supplies come from and who the subcontractors are. This enables them to have more reaction time as they can quickly identify which suppliers might be heavily impacted by the disruption and start looking for alternatives or implement backup plans. Although mapping and monitoring come with some costs, these costs are often cancelled out by savings from adequate planning of inventory and sourcing processes facilitated by mapping and monitoring.
The less flexible method to achieve a resilient supply chain would be creating redundancy at different parts of the supply chain. For example, a manufacturer can hold a high level of inventory or work with multiple suppliers to resist or even avoid the effects of disruption. However, creating redundancy can be quite costly. If a manufacturer decides to maintain a high level of inventory, the total cost of ownership can be quite daunting and this also creates significant amount of waste.
Having multiple suppliers then seems to make more sense on a financial point; however, ensuring all the products from different suppliers are up to standard will then be a complex task. Nonetheless, creating redundancy does provide breathing room for manufacturers to recover from the disruption.
Flexibility enabled by digital manufacturing
Contrary to creating redundancy to provide cushions needed for organizations to recover, having a more flexible sourcing strategy that utilizes on-demand digital manufacturing is certainly less costly and more efficient.
Manufacturers offer after-sales services to their customers and these services require spare parts. However, supply of spare parts will eventually be stopped as suppliers will terminate production of old spare parts at some point. Aside from that, unexpected disruption might also hinder the ability of the suppliers to provide spare parts. The safest way is then to hold a high level of spare parts inventory by placing a last time buy order, but this might incur extremely high costs and the last batch of spare parts will eventually run out of stock.
Digital manufacturing allows manufacturers to produce their spare parts on-demand and ensure long-term availability of spare parts by digitalizing the spare parts inventory. This lifts the heavy burden of unnecessarily high level of inventory, reduces the costs that come along with the inventory, and makes the entire supply chain more resilient to disruptions by providing another source of procurement.
Spare Parts 3D provides digital solutions for spare parts management and production for manufacturers to have more resilient supply chains, allowing them to overcome disruptions caused by internal or external factors and even stands out from the competition in challenging times. Contact us to make your spare parts supply chain more resilient now!