Contingency Planning for Supply Chain Disruptions
The COVID-19 pandemic has caused all kinds of disruptions for manufacturers across the world. Here in the United States, many plants rely on supplies from overseas, and with shipments delayed, companies have been forced to pause production or find other solutions. Even before the pandemic began, more than 20 percent of US manufacturers reported supply chain disruptions due to ongoing trade conflicts, according to BDO’s Manufacturing CFO Outlook Survey.
These situations have forced manufacturing leaders to recognize the need to plan for unforeseeable scenarios. An effective contingency plan will allow your organization to adjust quickly and avoid lost time and resources.
Today, the manufacturing community is still dealing with the ripple effects of the pandemic and other world events. Below, we’ll discuss three of the biggest problems businesses may be experiencing and how contingency plans can help get things back on track.
Scarce Raw Materials
Global travel and transportation have been sharply disrupted recently as countries continue to implement restrictions due to COVID-19. While these measures are likely necessary to slow infection rates, they also can prevent manufacturing plants from receiving the supplies they need to continue production. Manufacturers of products like toilet paper and cleaning supplies were hit especially hard as demand jumped during the pandemic. 3M, a market leader for N95 respirator masks, anticipates demand for their respirators will outpace the supply for the foreseeable future.
A contingency plan will primarily help manufacturers decide how to move forward most efficiently, even if their supply of raw materials is low. That may mean finding how to adjust processes to main current production levels or ramp up some items while pausing others. In order to create a contingency plan, plant engineers should analyze an extensive number of what-if scenarios to determine the appropriate levels of resources they can maintain on hand to achieve the desired production flexibility. According to Ronen Lazar, Co-Founder and CEO of Inturn, an inventory software company, “The brands equipped to efficiently optimize their inventory in real time are the ones that will be best positioned to weather the storm.”
Sudden Shifts in Demand
During the pandemic, some manufacturers dealt with a steep decline in demand. Rather than halt production or make products that would go to waste, some manufacturers chose to shift into producing industry-related high-demand items. For example, clothing manufacturers started producing face masks, and alcohol brands transitioned to hand sanitizer. This strategy is smart for business (and for our public health), but it can be difficult to shift production to efficiently manufacture the revised items.
In addition to identifying potential contingency scenarios, in this case, manufacturers may also create a list of corresponding planned responses or products that the facility could easily pivot to. With backup product options in place, you can again establish the base levels of materials to keep on hand to allow for quick shifting when needed.
Workforce Shortages
Unfortunately, a number of manufacturing plants have experienced outbreaks of the coronavirus across their workforce. In Kansas City, a paper product manufacturer reported a large outbreak at their plant, with more than 200 of their employees testing positive. If a large number of your employees are sick or quarantined, how do you continue effective production?
To be the most efficient, manufacturers need plans in place to solve workforce shortages as they arise. First, they should determine how to reassign healthy employees across shifts to find the optimal distribution and cause minimal disruption. If possible, manufacturers may also need to create an efficient on-boarding process for any temporary workers they hire. In the case of an illness, it’s also important to first get the facility and equipment properly sanitized before bringing in more people to prevent another outbreak.
These contingency plan actions are helpful, but they can be incredibly complicated and time-consuming to do manually. VirtECS is the most useful tool for responding to emergencies and sudden process changes. It’s able to rapidly test many scenarios, including various emergency situations, to identify the most effective and efficient response. This includes variables such as the amount of raw materials to keep on hand and the number of employees to keep on one shift. With VirtECS, these determinations can be done instantly, without any complicated calculations on your part. If you’re interested in exploring a manufacturing contingency plan at your company, fill out our contact form here.
