The world has become smaller – and this has accelerated the growth and transformation of world economic development.  Globalization also plays a major part in the transformation of manufacturing as well.

It’s easy to understand the global supply chain is extremely delocalized and is in reality a long chain of globally distributed suppliers all working in tandem to solve a problem. It’s therefore understandable the end product of your manufacturing does not necessarily have to be completely built within the walls of your enterprise. It’s but a decentralized assembly of various parts, to arrive at the end result.

As is the case with several large scale manufacturers across the world, about 80% of the individual components of any automotive production line are built by different vendors across the world and assembled remotely.

This is hugely impacted by something like the pandemic that has swept the globe, since it is like throwing a monkey wrench into the works. The situation has brought the entire process to a grinding standstill, with everything affected, from the materials, to labor, to sourcing, and logistics.

Even before the pandemic hit, the trade war between the US and China had both countries at odds,  forcing companies in the US to stave away from China and restructure their supply chains.

Considering medical device manufacturing, especially in the production of ventilators, it is seen evidently. A ventilator is a medical device that holds more than 2000 to 3000 working parts, most of which are completely electronic. China has the monopoly on many of these parts and is probably the only supplier with a strong foothold for the last 10 to 20 years.

The onset of the coronavirus pandemic created several problems in the supply chain, including the availability of critical components from China.. This has pushed organizations to completely rethink their strategies and the design of the ventilator itself – a design that relies lesser on Chinese suppliers.

Before the arrival of the virus or the existence of any major trade war, the supply chain was already rife with problems. On major issue that the industry faced was that procurement did not convey full confidence in the procurement of external parts needed for manufacturing.

Deloitte’s Global Chief Procurement Office Survey 2019, has found that a majority of CPOs believe that procurement risks  are on the rise, accelerated by what’s happening across the world.

The results of the research also showed that CPOs were focused more on achieving competitive bidding and contract renegotiation to achieve cost reductions and reduce financial risk last year.

 

Reimagining the traditional Supply Chain

The pandemic has blown large holes in the large and unwieldy system that is existent in supply chains today. It has accelerated the thought process behind Digital transformation and has created an urgency for shorter time-to-markets. So it has become a need of the hour to look for solution and suppliers that will help in taking the leap and achieving digital transformation.

One way to look at it, is to localize the supply chain, and to start looking at local suppliers as a stopgap in this situation of emergency. This helps to plug any leaks you may see now or for the future with any of your current supplier relationships.

Keeping everything close to the source might be a good idea. Having access to components and reliable suppliers close to the point of design, production, and assembly, will shorten the time-to-market considerably. It would also smoothen the handshake between manufacturing engineers and suppliers, impacting the entire process lifecycle.

Although, redesigning the entire supply chain would be ideal, it is also a complex undertaking, and it would be prudent to create a backup with localized suppliers, production and distribution. This drastically reduces the risk of total and complete disruption of your supply chain.

There are both pros and cons in the situation: separating the primary and secondary suppliers will spread and decrease the risk but could lead to an increase in costs. But on the other hand it could also effect in reduced transportation costs.

 

Making the actual transformation

Digital Transformation promises to bring value to the supply chain by creating a more dynamic and convivial handshake between the procurement departments of the suppliers and vendors.

The IT and procurement departments of any organization must be on the same page, and must work in tandem in delivering digital transformation, without detrimentally impacting manufacturing.

In this age and time, when a pandemic is rampant, it is absolutely necessary to look at digital transformation and Industry 4.0,  in order to remain competitive and efficient in this  business. The ultimate win in this situation would be a real-time connected supply chain that works in complete tandem with your production status. A system that would be able to carry out smart contracts and payments with artificial intelligence (AI) and machine learning, creating a supply chain that’s both smart and efficient.

Blockchain is one more piece in the puzzle you may want to consider. With Blockchain, different ecosystems behave independently, sharing and agreeing on crucial information. Blockchains allow the concept of decentralized supply chain to work despite the pandemic or any other global tragedies. Blockchain would allow perfect synchronization of data across a network, with participants in the blockchain contributing and verifying the work of others.

Many agree that blockchain technology, because of the transparency it ensures, is far superior in terms of security as compared with open firewalls and multi-factor authentication.

Although AI and Machine Learning aids in the processing of data in the supply chain, blockchain allows for security, formatting, and architecture. It offers the highest levels of security between the two end points of the data highway.

Blockchain inherently increases the transparency of data, creating a supplier ecosystem that’s transparent, showing the authenticity and capabilities of the supplier openly. This drives supplier trust and product authentication

Authentication has become necessary in all industries and ever more so in industries such as aerospace, automotive, and medical devices. It has also increasingly important in resolving supply chain disputes in high-intensity IP industries.

Although the applications of Blockchain are limited in the realm of digital Transformation for Supply Chains, the onset of the pandemic has pushed organizations, especially manufacturers to look at the benefits of blockchain to outweigh the risks in the long run.