{"id":8374,"date":"2021-08-10T07:08:01","date_gmt":"2021-08-10T07:08:01","guid":{"rendered":"https:\/\/www.mrpeasy.com\/blog\/?p=8374"},"modified":"2023-06-14T07:21:56","modified_gmt":"2023-06-14T07:21:56","slug":"supply-chain-disruptions","status":"publish","type":"post","link":"https:\/\/www.mrpeasy.com\/blog\/supply-chain-disruptions\/","title":{"rendered":"How to Manage Supply Chain Disruptions?"},"content":{"rendered":"\n<p>The world has experienced historic supply chain disruptions during the last years. From trade wars and COVID-19 to semiconductor shortages and the Suez canal blockage \u2013 there are few industries that have not been affected. The lesson learned is to be better prepared and to remain flexible.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"571\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/08\/supply-chain-disruptions-1024x571.jpg\" alt=\"supply-chain-disruptions\" class=\"wp-image-8375\" srcset=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/08\/supply-chain-disruptions-1024x571.jpg 1024w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/08\/supply-chain-disruptions-300x167.jpg 300w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/08\/supply-chain-disruptions-768x428.jpg 768w, https:\/\/www.mrpeasy.com\/blog\/wp-content\/uploads\/2021\/08\/supply-chain-disruptions.jpg 1502w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<!--more-->\n\n\n\n<p>You can also listen to this article: <\/p>\n\n\n\n<figure><iframe loading=\"lazy\" height=\"150\" width=\"100%\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=qqjum-10e77d8-pb&amp;from=pb6admin&amp;share=1&amp;download=1&amp;rtl=0&amp;fonts=Arial&amp;skin=1&amp;font-color=&amp;btn-skin=3\"><\/iframe><\/figure>\n\n\n\n<p>Traditionally, manufacturing companies lived by their supply chain. If the chain was well-managed, companies could realize greater profits. If not, they experienced higher costs and loss of competitiveness. To address this, supply chain professionals created complex models for managing supply chains that relied heavily on lean methodology and JIT (Just-In-Time) planning. The entire global supply chain system became attuned to the lowest cost and most optimized volumes delivered at or near the point of use.<\/p>\n\n\n\n<p>However, the last few years have thrown the entire global\nsupply chain into chaos. Beginning with the tariff and trade wars, political\nuncertainty, and other events: disruption began to impact the global supply\nchain in unprecedented ways. This was followed by the seismic upheaval of\n2020\u2019s worldwide pandemic, followed by 2021\u2019s \u201cstuck in the canal\u201d cargo debacle.\nSuddenly, weaknesses in an assumed smooth and stable global supply chain were\nexposed.<\/p>\n\n\n<div class=\"banner-v2\">\n    <p class=\"banner-v2__desc\">Become flexible with a robust MRP system<\/p>\n    <a class=\"banner-v2__link\" href=\"https:\/\/www.mrpeasy.com\/sign-up\/\" target=\"_blank\" data-ga-event=\"blog_signup_banner_blue\">Try MRPeasy for free<\/a>\n<\/div>\t\t<style>.banner-v2 {\n    float: right;\n    display: flex;\n    flex-direction: column;\n    justify-content: center;\n    align-items: center;\n    padding: 40px 32px;\n    gap: 16px;\n    width: 356px;\n    height: 205px;\n    background: linear-gradient(199.68deg, #6084E5 13.17%, #5FA7DD 82.1%);\n    border-radius: 4px;\n    margin-left: 12px;\n    margin-bottom: 12px;\n    margin-top: 15px;\n}\n\n@media (max-width: 767.98px) {\n    .banner-v2 {\n         width: 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!important;\n}<\/style>\n\t\t\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #343333;color:#343333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #343333;color:#343333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.mrpeasy.com\/blog\/supply-chain-disruptions\/#Traditional_supply_chain_weaknesses\" >Traditional supply chain weaknesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.mrpeasy.com\/blog\/supply-chain-disruptions\/#Impact_of_disruption_on_supply_chains\" >Impact of disruption on supply chains<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.mrpeasy.com\/blog\/supply-chain-disruptions\/#Steps_for_managing_supply_chain_disruptions\" >Steps for managing supply chain disruptions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.mrpeasy.com\/blog\/supply-chain-disruptions\/#Using_data_to_manage_supply_chain_disruptions\" >Using data to manage supply chain disruptions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.mrpeasy.com\/blog\/supply-chain-disruptions\/#Key_takeaways\" >Key takeaways<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Traditional_supply_chain_weaknesses\"><\/span>Traditional supply chain weaknesses<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The re-evaluation of global <a href=\"https:\/\/www.mrpeasy.com\/blog\/supply-chain-management\/\" target=\"_blank\" rel=\"noreferrer noopener\">supply chain management<\/a> for most companies wasn\u2019t because there was a disruption. Supply chain disruptions have always been present, and most companies had at least minimal contingency programs to address them. But in the last half-decade, it was the number and scale of disruptions that have exposed weaknesses in supply chain planning and caused many companies to rethink their strategy. The result is a newly emerging \u2013 and still evolving &#8211; supply chain model based on the assumption that regular disruption centered on large-scale events is here to stay rather than one that assumes an ever stable chain.<\/p>\n\n\n\n<p>Fully&nbsp;<a href=\"https:\/\/www.prnewswire.com\/news-releases\/pandemic-exposes-manufacturing-supply-chain-weaknesses-report-finds-301306839.html\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">76% of manufacturers<\/a> feel that these weaknesses were exposed by the pandemic alone. Because of this and other significant events, the same proportion of companies are planning to ask for changes from vendors to mitigate future problems as they occur. Steps include greater diversification of supplier base (45%), consolidation or evaluation of existing suppliers (16%), and logistics evaluation to address late delivery and other lead time issues.<\/p>\n\n\n\n<p>As manufacturers struggle to find the right combination of\nstrategies to improve supply chain models, here are a few of the weaknesses\nthey are addressing:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Focusing on cost<\/h3>\n\n\n\n<p>For the last two decades, supply chain management had become\npredominantly cost-driven. Purchasing strategies were designed to identify the\nlowest cost supplier regardless of where they were on the globe. Far-flung\nsupply chains were standard, with companies sourcing many raw materials from\nChina and other parts of Asia. This cost-focused strategy was shown to be a\nweakness during COVID-19 as the distance was compounded by countries battling\nthe pandemic, much like manufacturers in Western countries. With cost as the only\nfactor, many companies had few or no backup vendors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Relying on the lean methodology<\/h3>\n\n\n\n<p>As supply chains were considered inherently stable, many professionals and managers began to use <a href=\"https:\/\/www.mrpeasy.com\/blog\/what-is-lean-manufacturing\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"lean methodology (opens in a new tab)\">lean methodology<\/a> to manage the supply chain. But while lean has been crucial to increasing efficiency and eliminating waste in manufacturing, it has proven to be less effective in a disruption-prone global economy. Demand, capacity, labor, inventory, and many other areas working on lean principal have been impacted during disruption, leaving manufacturers struggling to cope.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Linear statistical analysis<\/h3>\n\n\n\n<p>Traditional supply chain methods were also statistically linear in many companies. While many had adopted <a href=\"https:\/\/www.mrpeasy.com\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"MRP (opens in a new tab)\">MRP<\/a> and demand planning software to help manage operations, there was still a lot of spreadsheet-based planning and scheduling that relied on slow and error-prone human analysis. Because of this, transactional data was often pushed from one department to the next in order. The thought of the chain being dynamic and a \u201ctwo-way street\u201d where data was shared was not expected.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Data fragmentation<\/h3>\n\n\n\n<p>Perhaps few issues showed the inherent weakness of\ntraditional supply chain models other than&nbsp;fragmented data.&nbsp; Because\nmany companies still lagged in digital transformation and maintained either\nmanual or disparate software systems with little interoperability, data was\nstill siloed and not available or understandable to everyone within the chain.\nThis held back sophisticated analytics from being deployed to understand how\neach segment of the chain relied upon one another. And the fact that it was\none-way kept companies from deploying automated solutions in a dynamic system.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact_of_disruption_on_supply_chains\"><\/span>Impact of disruption on supply chains<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As these weaknesses became apparent, there was a severe\nimpact on each supply chain segment as each new disruption hit. These impacts\ninclude:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Supplier instability<\/h3>\n\n\n\n<p>Supply chain disruptions of the last few years have tended to be global rather than regional. Because of this, manufacturers encountered supplier instability unlike any experienced before while&nbsp;suppliers were dealing with the same disruption. It was no longer an issue of finding expedited or rerouted shipping; it was instead a hard stop. Long-term relationships were turned upside down. Many producers wound up with no backup vendors, causing either a scramble for the available stock from other sources or even shut down in some manufacturing segments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Raw material cost<\/h3>\n\n\n\n<p>Manufacturers have always looked to control raw material\ncosts. But in recent years, the impact was not simply a decimal point margin\nissue between low and next to lowest price. In many cases, it became an issue\nof no availability versus availability at&nbsp;a cost that proved prohibitive\nto production, causing many companies to temporarily shutter operations rather\nthan make goods at a price higher than consumers were willing to spend.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Production costs<\/h3>\n\n\n\n<p>Supply chain disruptions also impact production costs. Both direct and indirect costs have increased in recent years as companies struggled with stock-outs, remote working sales, customer service staff, and COVID-19 related shutdowns and mitigation procedures.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Cash flow<\/h3>\n\n\n\n<p>Many companies experienced cash flow issues related to the\nnew disruptions. Because the assumption of a stable supply chain meant\nlong-term contracts at high volume over an extended delivery period, companies\nfound that cash needed to pivot production to more profitable products was tied\nup in goods that would take much longer to arrive.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Steps_for_managing_supply_chain_disruptions\"><\/span>Steps for managing supply chain disruptions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To mitigate the effects of disruption within supply chains,\nmanufacturers must deploy new strategies. And any of the components of these\nstrategies are opposite from the assumptions of the last twenty years. This\nmeans making choices and tradeoffs to optimize production operations to the\nmost profitable products. It also means planning for broader swings in demand\nand implementing them on the production floor quickly.&nbsp;&nbsp;<\/p>\n\n\n\n<p>To accomplish this. Companies will need to automate as much as possible to leverage production data to move away from a lean-oriented supply chain to agile and resilient. MRP, demand planning software, and S&amp;OP processes can help break down silos and inject end-to-end visibility of the supply chain and its impact on production. By using these tools, manufacturing companies can create two-way, transparent, dynamic supply chains that work with MRP and <a href=\"https:\/\/www.mrpeasy.com\/enterprise-resource-planning\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"ERP software (opens in a new tab)\">ERP software<\/a> to adjust quickly.<\/p>\n\n\n\n<p>Steps to manage supply chain disruption include:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Manage known risks<\/h3>\n\n\n\n<p>While no one can predict all threats, it is possible to&nbsp;map\nand assess&nbsp;areas of the supply chain where these threats occur. These\ntrouble spots can be included in supply chain management practices and taken in\ndetail down to the production floor level. Knowing how to respond in a crisis\ncan save profit and help hold down high production costs during disruption.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Rethink inventory optimization<\/h3>\n\n\n\n<p>Supply chain inventory optimization has become almost synonymous with lean thinking. However, it has become clear that&nbsp;additional <a href=\"https:\/\/www.mrpeasy.com\/blog\/safety-stock\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"safety stock (opens in a new tab)\">safety stock<\/a>&nbsp;may be necessary. Inventory optimization strategies can also include the regionalization of suppliers through multiple vendors rather than reliance upon one low-cost supplier.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Reconsider supplier distance<\/h3>\n\n\n\n<p>Many manufacturing companies are considering the distance between their production facilities and their suppliers. Many manufacturing companies have begun reshoring suppliers by moving to local or regional sources despite the higher cost. Another effective strategy is nearshoring, where raw materials purchased in China or Asia are brought closer to production, such as Mexico for the US.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Manage demand<\/h3>\n\n\n\n<p>Managing demand is easier today than before. Demand planning\nsoftware that is interoperable with MRP and ERP systems can help sense and\ndetect demand trends and help deploy automated solutions to adjust supply orders\nup or down as needed.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Enable agile scheduling<\/h3>\n\n\n\n<p>Software can also help in creating more&nbsp;agile and dynamic scheduling. MRP systems today have dynamic <a rel=\"noreferrer noopener\" aria-label=\"BOMs (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/blog\/bill-of-materials\/\" target=\"_blank\">BOMs<\/a>, shop floor functionality, job planning, <a rel=\"noreferrer noopener\" aria-label=\"capacity planning (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/blog\/what-is-capacity-planning-in-manufacturing-erp\/\" target=\"_blank\">capacity planning<\/a>, and more. Analytics and accurate software data can help manufacturers develop \u201cwhat-if\u201d scenarios to plan for contingencies should they be required.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Using_data_to_manage_supply_chain_disruptions\"><\/span>Using data to manage supply chain disruptions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While disruption is here to stay in some form or another, manufacturing companies have tools available to reduce the impact and plan ahead.&nbsp; Companies must realize that human analysis, spreadsheets, and verbal agreements will no longer work in today\u2019s supply chain environment or manufacturing world. Instead, robust, <a aria-label=\"cloud-based manufacturing software (opens in a new tab)\" href=\"https:\/\/www.mrpeasy.com\/manufacturing-software\/\" target=\"_blank\" rel=\"noreferrer noopener\">cloud-based manufacturing software<\/a> can help optimize processes at the factory level with advanced ERP and MRP platforms, while demand and supply planning software can help manage the supply chain. Developing prudent and well-considered steps to create new supply chain strategies, combined with leveraging data through the use of best-in-class software, can help any manufacturer navigate disruption and continue to succeed.<\/p>\n\n\n<div class=\"banner-v1\">\n    <div class=\"banner__text\">\n        <div class=\"banner-v1__title\">Optimize your production and procurement planning<\/div>\n        <div class=\"banner-v1__desc\">MRPeasy users report a 54% average improvement in the overall performance of their company and a 42% increase in on-time deliveries.<\/div>\n        <div><a class=\"banner-v1__link\" href=\"https:\/\/www.mrpeasy.com\/sign-up\/\" target=\"_blank\" data-ga-event=\"blog_signup_banner_white\">Try for free<\/a><\/div>\n    <\/div>\n    <div class=\"banner__img\">\n        <img decoding=\"async\" src=\"https:\/\/www.mrpeasy.com\/blog\/wp-content\/themes\/mrpeasy\/assets\/images\/banner.svg\" alt=\"banner\">\n    <\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_takeaways\"><\/span>Key takeaways<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\"><li>Until today, supply chain management has evolved to achieve minimal costs and optimized volumes.<\/li><li>The last few years have brought massive disruptions into supply chains as well as to the reigning supply chain management paradigm.<\/li><li>The latest large disruptions have revealed weaknesses in manufacturing and distributing supply chains such as over-focusing on cost, relying entirely on just-in-time deliveries and linear analysis methods, as well as using fragmented data.<\/li><li>These weaknesses allowed the latest global disruptions to have a massive effect on the supplier stability, raw material and production costs, and cash flow of many companies.<\/li><li>Although many supply chain disruptions are very difficult to predict, it is always possible to prepare for them. Steps for doing so include: managing known risks, reassessing inventory optimization, reconsidering supplier distance, managing demand, and using better scheduling practices.<\/li><li>An ERP\/MRP system is a great tool for basic management of your supply chain and staying flexible during disruptions.<\/li><\/ul>\n\n\n\n<p><em>You may also like: <a href=\"https:\/\/www.mrpeasy.com\/blog\/procurement-management\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Procurement Management - A Quick Guide for Small Manufacturers (opens in a new tab)\">Procurement Management &#8211; A Quick Guide for Small Manufacturers<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The world has experienced historic supply chain disruptions during the last years. From trade wars and COVID-19 to semiconductor shortages and the Suez canal blockage \u2013 there are few industries that have not been affected. The lesson learned is to be better prepared and to remain flexible.<\/p>\n","protected":false},"author":4,"featured_media":8375,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[94,384],"tags":[733,732,32,66,730,731,169],"class_list":["post-8374","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tips","category-supply-chain-management","tag-data-fragmentation","tag-demand-planning","tag-mrp-software","tag-mrpeasy","tag-supply-chain-disruption","tag-supply-chain-disruptions","tag-supply-chain-management"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Manage Supply Chain Disruptions? - MRPeasy<\/title>\n<meta name=\"description\" content=\"The 2020s have started as the decade of supply chain disruptions. 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