Industry Viewpoints
To “Go local” or Not is The Ultimate Post-pandemic Supply Chain Question
Prior to the pandemic, Just-in-Time inventory management methods were revolutionizing manufacturing for many businesses around the world. It gave retailers a way to reduce their stockpile of raw materials down to strictly what they needed, when they needed it. Production was lean, profitable, and agile.
But in today’s post-lockdown world, big players like Ford are spending $1bn more in a single quarter, because the same supply chains are still hampered by the after-shocks of COVID-19. Businesses have started to ask: is going local the way forward?
The Benefits of Keeping it Local
In theory, re-strategizing to build new or expand existing local manufacturing facilities should reduce a company’s exposure to risk. As well as reduce transportation, tariff and tax costs, carbon footprint, while increasing control over operations. It’s no wonder that 75% of brands surveyed in 2020 said they were planning some sort of reshoring efforts.
But reshoring is complicated and expensive, and it may not be an easy switch for everyone. The advantage today, however, is that businesses can now tap into the power of data. They no longer have to passively respond to world event after they’ve happened.
So, here are six things to consider before embarking on a localization strategy:
Build a clear picture of your supply chain: before making any moves. The pandemic highlighted just how many unforeseen gaps there were for those who lacked a 360-view, and were unable to analyze strengths and weaknesses at an individual component and a holistic level. Data integrated solutions enable businesses to assess performance across a variety of functions and uncover previously hidden trends that allow you to work out the answers to your most complex challenges.
Consider “What if?’ scenarios: If the last few years has taught us anything, it’s that context is everything. Augmented analytics and AI-powered automation will reveal demand forecasts that flag exactly where stockouts are or where inventory carrying costs might happen. So, you’ll be able to use “What if?” scenarios and plan for demand volatility and constraints around suppliers or materials.
Set strong, measurable targets: Success for manufacturing firm Greene Tweed looks very different to that of humanitarian NGO Direct Relief. Take the time to establish what success looks like for your specific operation, setting achievable figures for production timelines, inventory costs percentages or a production timeline.
Prepare to assess in real-time, all of the time: Organizations need a dynamic relationship with information that reflects the current moment. Real-time data analytics provides this clarity, giving businesses an accurate picture of what’s happening in the moment and showing them how to respond. Using the latest tools available today, businesses can forecast changing trends and adapt to incoming disruption.
Test for weaknesses and adapt accordingly: before committing to anything. Just because you’ve decided it will be more cost effective to go local for a particular part, doesn’t mean there are suppliers nearby with the capacity to provide it. Explore new supplier relationships in neighboring countries and examine whether alternative components can achieve a similar desired effect.
Ensure it’s adaptable: Circumstances can change overnight for any business or market. Every aspect of your supply chain must be adaptable. A data analytics tool can help you establish this definitively. It puts KPIs to every movement in your supply chain, like identifying track order accuracy, shipment delivery times, average fulfilment costs, and warehouse receiving turnaround time.
Data is the Key to Proceeding with Clarity
Whether you stay global, go local or are one of the 81% who are implementing duel-sourcing strategies; one thing remains congruent throughout, the value of good data analytics. By taking an active approach to business intelligence and using good real-time data, anyone is able to answer the ultimate post-pandemic supply chain question.