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Supply Chain Strategies for a Post-COVID Era
April 14, 2022
In this issue of KGP Point of View we talk with VP of Product Management, Sunil Jain, on the state of challenges in the supply chain industry, the impact on telecoms and how KGPCo is managing them.
What are the supply chain challenges today in the COVID-19 era?
Jain: Over the last few decades, the Supply Chain industry primarily operated on Just-In-Time efficiencies and lower costs. Companies aggressively reached out to the lowest cost suppliers across the globe and maintained lean inventory while trying to manage acceptable service levels.
COVID-19 has since exposed some of these as weaknesses in the current supply chain industry. Supply chain managers, and some of them for the first time in their long careers, are now dealing with a “perfect storm” of sorts: unprecedented demand volatility, increasing lead times (some of them measured in years rather than weeks or months), raw material shortages, multiple and frequent price increases, freight/transportation challenges, and labor shortages in their warehouses.
The supply chain as it stands now is broken in every conceivable industry, including telecom.
How is the Supply Chain industry preparing for post-pandemic world?
Jain: Supply Chain managers have learned several lessons from the pandemic – the biggest of which is managing the diversity and resiliency of their supply chain.
A majority of manufacturing companies are adopting a “China +1” strategy by adding sourcing from countries like the U.S. (insourcing), Vietnam, India, Indonesia, and Taiwan, among others. Companies who traditionally sourced from the lowest cost suppliers, and often single-sourced for each product, are now adding more suppliers to mitigate the risk of single supplier instability, cost escalations, and long lead times. However, supplier diversity might still not be enough in situations where product shortages can impact an entire industry. Supply Chain managers are increasing their buffer inventory to survive prolonged disruptions, should another epidemic like COVID-19 happen again. Unfortunately, these efforts, although necessary, are driving up the costs and operational headache for everyone.
Customers, on the other hand, are asking for more transparency and efficiencies from their suppliers. This is resulting in added innovations like accelerated supply chain digitization and automation. Robotics in warehouses, AI and machine learning for demand forecasting and planning, cloud-based software for order-management, transportation, and warehouse automation, are examples of technologies that are gaining traction among supply chain managers.
Unfortunately, there is no silver bullet when it comes to labor shortages and transportation challenges due to the macroeconomic factors that influence their outcome. However, managers are more aggressive now in optimizing and planning for their transportation needs in advance by signing longer term contracts with their carriers and consolidating shipments. Companies are increasingly open to providing flexible hours, on-site day care, and focusing on safety and well-being of their employees to attract and retain talent.
How are the challenges affecting KGPCo’s business and how are we responding?
Jain: KGPCo has not been immune to the supply chain issues that are plaguing every industry in the nation. Heavy demand from wireline, wireless and cable providers for massive fiber deployments, the launch of 5G, and transition to new network architectures (such as DAA and CORD) are adding to more complexity in the supply chain.
We have experienced an unprecedented increase in lead times from suppliers across all product categories. We are building larger buffer stocks and placing bulk orders for scheduled deliveries in the future to maintain a constant flow of materials in the post-pandemic era. Material shortages have resulted in some of our suppliers closing their doors for good, while others are still recovering from COVID-related setbacks. Customers are encouraged to add more suppliers to their portfolio, and we are helping to identify and onboard new suppliers who can offer product alternates (with the same form, fit and functionality) with better lead times. Cost increases are inevitable in this inflationary environment; however, we are doubling down on our sourcing efforts to relieve some of the cost pressures for our customers.
Even before COVID-19, KGPCo has made investments to upgrade our supply chain technologies (systems like ERP, WMS, CRM, TMS, e-commerce, and EDI). These efforts have been accelerated over last few years and we are offering even better visibility and cost savings for our customers. We are an employee-focused company as much as we are a customer-centric organization. Labor shortages are here to stay, and we are competing for the best talent in the industry. Our company offers flexible and hybrid work schedules and improved health protections (PPE, COVID testing) for our employees. Our focus on safety, quality and sustainability has not changed even during these chaotic times.
What is your point of view on this?
Jain: COVID-19 has been a wake-up call for the supply chain industry. Very few (if any) companies were prepared for this prolonged disruption; some have closed doors permanently. At KGPCo, we have been able to weather this storm relatively better than others, primarily due to our very deep and meaningful relationships with our supplier community, while maintaining an uncompromising focus on our customers.
The good news is that the changes in macroeconomic environment will eventually relieve some pressure on the labor shortages and cost escalations. The ongoing capacity improvements by suppliers will eventually level off the demand-supply imbalance. However, we cannot afford to forget the lessons learned from this pandemic. Supply chain improvements do not need to be an after-thought. It should be on top of strategic initiatives for all business managers. KGPCo is here to help.
As challenges in the supply chain persist, KGPCo is a steadfast and solutions-based partner for communications businesses. Our Sourcing and Supply Chain experts can establish and oversee a logistics program to fit your business needs.
