After Donald Trump won the presidential election on November 8th, you likely experienced a whirlwind of feelings, depending on whether your candidate won or lost. But if you're like many executives who manage a supply chain, you likely had something very specific on their minds: what are the potential changes to trade agreements and the effects on processes and structures?
With significant uncertainty around the North American Free Trade Agreement (NAFTA) and the Trans Pacific Partnership (TPP) trade deals based on public statements from the President-elect, there could be a long list of potential changes ahead. These may include impediments to trade with China, stalled or stranded goods at manufacturers located in China and Mexico, and increased local labor costs among other issues.
And although changes based on the U.S. election are the latest concern, dealing with uncertainty is nothing new for today’s global supply chain managers. Every day, they face a variety of issues, including severe weather, port strikes, customs changes and other things. And they must also be prepared for larger changes, such as the expansion of the Panama Canal, the Hanjin shipping crisis, and, as we’ve seen in the last month, the effects of a change in the administration.
In Supply Chain Management, Change is the Only Constant
Today’s supply chain managers have to be able to shift, rework, and reroute their processes in order to circumvent risks and avoid disruption. In a constantly changing environment, supply chains must be elastic enough to shift on a moment’s notice to meet customers’ demands.
Traditional supply chain planning tools such as using historical patterns to determine production levels, raw materials, and transport capacity don’t always work. Instead, supply chains must be flexible, forging collaborative relationships with suppliers, collecting and analyzing data for fast and accurate inventory decisions, automating wherever possible, and taking advantage of the latest practices and technologies.
3 Best Practices to Create an Agile Supply Chain
1. Leverage the Shared Economy
From transportation to storage, on-demand services allow suppliers to get the trucks and warehouse space they need without long term contracts and large fees. When change occurs, last minute delivery is a hurdle for most companies as local trucking costs can be high. Utilizing companies that offer on-demand truck services is becoming more common for suppliers to get their products to their final destinations efficiently and inexpensively, especially when they face unplanned obstacles.
Many organizations are also using on-demand storage, a system where companies can quickly add capacity without long term contracts and service fees. This allows companies to move slow selling stock out of prime distribution centers and frees up much needed space.
2. Extend Automation Outside the Enterprise
Successful companies work together with their partners on a variety of issues, from financing to labor to environmental concerns. Greater communication and collaboration helps avoid risks, identify problems early, and resolve issues quickly. It also reduces the ‘bullwhip effect,’ the variability at points along the supply chain caused by shifts in customer demands.
Many companies have Enterprise Resource Planning (ERP) solutions that aid automation and offer visibility across all aspects of the supply chain, from warehouse management to transportation. Some companies are seeing the benefits of moving beyond enterprise automation by sharing data and reports outside the enterprise. And a number of these systems are cloud based also allowing for fast and immediate access to orders, shipping and inventory information by all parties along the supply chain.
3. Evaluate (or Re-evaluate!) 3rd Party EDI Providers
For many companies, managing the various systems required for supply chain processing in-house is costly, complicated, and time consuming. The systems needed for business to business integration (B2Bi) involve electronic data interchange (EDI), collaboration software for orders, shipments/tracking, and fulfillment and cloud based applications.
Managed services vendors specialize in these applications and provide expertise, technical infrastructure, and program and process support to create a digital supply chain that is efficient, flexible, cost effective and scalable. In fact, according to a study we conducted with the University of Tennessee’s Global Supply Chain Institute, 69% of respondents said they could respond more quickly to changes in their clients’ environment when using a managed service for B2Bi.
Managed services help companies manage distribution through unexpected changes, providing full supply chain visibility. When it comes to the results of the U.S. election, companies using managed services, for example, would be able to quickly shift fulfillment of orders from one country to another using EDI solutions to send in real time all relevant information including customer requests, inventory information, and shipping logistics. Managed services also collect all of the information coming in from various supply chain partners, and make it visible to all partners so that decisions can be made in real-time.
As we wait to fully understand the changes that lie ahead, there are many things supply chain managers can be doing today to prepare. By improving the flexibility of their supply chains so they can react quickly to changes, they will be best prepared for any surprises the future has in store.