Building resilience against future supply chain shocks

The UK is in the midst of a supply chain crisis. From labour shortages to a lack of raw materials and surging costs for consumers, what began as an issue for businesses to deal with at the onset of the coronavirus pandemic has now spiralled into an endemic challenge that is facing organisations of all sizes and across almost every sector of the economy.

Supply chains are becoming increasingly unstable, they are unable to react swiftly to spikes in demand and as a result business leaders are grappling to find new ways to address the problems they’re faced with. The solution could lie in spontaneous supply chains.

What is a spontaneous supply chain?

At the beginning of the pandemic, we saw the emergence of ‘spontaneous supply chains’ – where the supply network emerges adaptively and at pace. This could be prompted by a natural disaster, such as an earthquake, or a rapid spike in demand as we saw recently with the dearth of semiconductors.

Where supply chains are typically planned, spontaneous supply chains are natural and unconstrained. The pandemic provided the perfect storm for different types of spontaneous supply chain strategies to develop, which under normal circumstances, would not have been possible.

The four spontaneous supply chain strategies

Businesses that have responded well to supply chain disruptions have deployed different spontaneous supply chain strategies to mitigate the challenges they face.

The first is pivoting, which sees companies adapt to manufacture the supplies they need using their existing capabilities and those of their partners.

Firms like Dyson pivoted during the first wave of the pandemic in response to the UK government’s calls to join a wartime style efforts to manufacture ventilators. Dyson collaborated with Cambridge-based The Technology Partnership to manufacture an entirely new medical ventilator in just 30 days.

Crucially, businesses need a level of flexibility in their supply chains and to be prepared to collaborate with old and new partners in order to cater for spikes in demand and changes in consumer behaviour.

The pandemic also prompted a second type of spontaneous supply chain strategy – repurposing.

We saw many firms leverage their existing supply base and reallocate resources to support local communities, while preserving their workforce at the same time. For example, in response to a national shortage of PPE for NHS employees, Jaguar Land Rover produced reusable, NHS-approved 3D-printed protective visors for key workers, repurposing its own state-of-the-art 3D printing resources.

By repurposing, firms are able to deal with demand or supply shock by manufacturing a different product, which might be crucial for their survival, or to gain first mover advantage when an opportunity presents itself.

The third type of spontaneous supply chain strategy is the ‘ramp-up’ strategy. A case in point is 3M, which took Zara’s famous agile supply chain concept to the next level by building excess capacity at a time when there was no real increase in demand in sight.

After the SARS epidemic of 2002-03, 3M realised that it was unprepared to deal with the increase in demand for N95 masks. So, they built surge capacity in factories around the world and today use this to ramp-up production when required. This paid off following an explosion in demand for respirator masks at the beginning of the pandemic and within just two months, 3M was able to double its global production of N95 masks to 100 million a month.

For those considering a ramp-up strategy, its vital to keep a firm eye on the horizon and be in touch with what’s happening on the ground in order to ramp-up effectively and at pace.

Orchestration is the fourth type of spontaneous supply chain approach and in this instance the orchestrator – the firm responsible for the coordination of all key activities across the supply network – collaborates with its partners and leverages their capabilities to co-create value.

The High Value Manufacturing Catapult, a group of manufacturing research centres in the UK, orchestrated the formation of VentilatorChallengeUK – an industrial consortium of nearly 30 firms, including Accenture, DHL, McLaren and Unilever, to create a spontaneous supply chain to scale up production of ventilators based on existing technologies in place.

The Airbus wing factory assembled aspirators, Ford’s Dagenham site was converted for the sub-assembly of ventilators, and McLaren reverse engineered components of vital test boxes using 3D CAD. Siemens Healthineers helped gain MHRA approval, while a 3,500-strong assembly team was trained to work at seven large-scale manufacturing operations across sites in the UK. There were 42 million parts procured from 22 countries to manufacture over 13,000 ventilators in just 12 weeks – more than doubling the NHS stock.

Lessons for the future

The pandemic has demonstrated how much our economy and way of life depends on supply chains.  These four strategies can be deployed by businesses in other scenarios where they will need to change, evolve, and reinvent their supply chains in a short timeframe.

By identifying suitable partners, sharing resources and knowledge, and developing strong relationships with suppliers and network ties, firms will be able to leverage each other’s capabilities and be in a stronger position to deal with changing consumer preferences and offer rapid response if there is a shortage of critical products.

Spontaneity is counterintuitive for most supply chain professionals where their entire careers are built on planning, optimisation, and efficiency. To build resilience against future supply chain shocks, these ideas will need to be turned on their heads. Firms will have to utilise the power of spontaneous supply chains and be prepared to evolve rapidly.

Dr Fahian Huq is a Senior Lecturer in Supply Chain Management at Alliance Manchester Business School.

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