Safeguarding your business against supply chain disasters

NATURAL and man-made disasters happen every day in every country, but the increasingly global nature of our supply chains means that Australian manufacturers’ busi nesses could potentially be threatened by an earthquake in India or civil unrest in China.

One company offering advice for manufacturers to safeguard their supply chains against dis ruptions is Accenture Australia, which provides supply chain practice, logistics and procure ment services.

Originally out of the US, the company designs and optimises transport distribution networks, helps its clients reduce their inventory working capital, and provides spare parts for logistics operations.

Though Accenture has a strong presence in the retail and con sumer goods industries, the com pany’s managing partner for sup ply chain management, Zeljko Nikolic, cites the defence, energy and mining markets as important areas for future growth due to the increasingly global nature of their supply chains.

One of the most important — and perhaps little-understood — things manufacturers must pro tect their supply chains against is natural disasters.

“Defence is really an area that benefits a great deal from supply chain and logistics improvement and we can see this being very topical in Australia moving for ward,” Nikolic told Manufacturers’ Monthly.

Nikolic says it is crucial for manufacturers to have a stream lined supplier process and pre- qualified alternative suppliers they can switch to very quickly, and this is where good supply chain practice comes in.

“It’s about looking at flexible manufacturing strategies. Where you’re able to have multiple manufacturing locations in Australia and overseas, it pays to have the manufacturing designed in a way that it’s flexi ble to run different products and have relatively quick changeover between products in different locations,” he said.

According to Nikolic, the affects of the Iceland volcano on the world’s product supplies — which put the world’s logistics systems in to disarray in April this year — could have been less ened if global manufacturers had adopted more flexible supply chains.

Though Australia wasn’t affected to the same extent as Europe and the UK, Nikolic says we should be aware of similar future disruptions to our supply chains and prepare our selves accordingly.

“The Icelandic volcano episode was an interesting case study for all organisations across the world an in Australia. The lesson is, some of these natural disasters and disruptions can’t be avoided, however the issue is how well- prepared the organisation is to deal with them,” he said.

“In today’s world there are two factors making this a bigger impact than previously. Greater interconnectiveness and length of supply chains because of off shoring sourcing from all differ ent parts of the world has meant transportation exposes them much more to disruptions than was previously the case.

The world we now live in is a world of much greater volatility, in all sorts of dimensions; com bining those issues of volatility and much longer supply chains means that it doesn’t have to be a volcano, but businesses will be exposed to disruptions to their supply chains which can have real bottom line impacts on their customers.”

According to Nikolic, we have our fair share of potential disas ters closer to home, including continuing civil unrest in Thailand. With the large number or manufacturers and OEMs sourcing product from South East Asia and China, the possi bility of our supply chains being interrupted is much higher than we think.

“While 20 years ago these sorts of things just happened in anoth er country, these occurrences are now much more relevant to how our businesses operate in Australia,” he said.

A good place to start is to introduce flexibility into product design by reducing complexity of the product ranges on offer.

“This allows organisations to feed into the flexible manufac turing capability: if they can use a much greater degree of com mon parts, they can design much easier systems to not only ratio nalise inventory, but have flexi bility in their network about how they can supply,” he said.

The overall message is that manufacturers must optimise their supply chain and logistics networks to guard against risk. This can be done through a com bination of procedures, including enlisting a supply chain manage ment software system, and com ing up with alternative suppliers and raw materials.

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