Technology Supply Chain Management | Dynamic Technology Solutions

Digitization and ESG in Focus at DMSCA Accelerate2023 Conference

The Dynamic Technology Solutions team recently participated in one of the leading education and training events promoting diversity-led supplier development and supply chain strategy. Accelerate2023, the annual gathering of the Diverse Manufacturing Supply Chain Alliance (DMSCA), brought together procurement officers of large multinational companies and leaders of small to midsize manufacturers to promote a vision for U.S. manufacturing that is innovative, sustainable, and inclusive.

This year’s conference explored hot topics such as digitalized supply chain networks and ESG (environmental, sustainability, and governance)-driven circular supply chains, while also showcasing corporate supplier diversity. The Dynamic team members on-site at Accelerate2023 included COO Mike Hart, and Business Development Vice President Tami Schultz, who noted several useful trends and takeaways on topics of importance to both procurement leaders and suppliers.

“We’re hearing a key strategy to build resiliency into the supply base is a shift from globally centralized to local suppliers,” Ms. Schultz said. “Many life sciences customers are scaling up their local supply base.”

Ms. Schultz reported that procurement teams have also shifted from having an evenly divided internal/external focus to having more than 90% external focus to ensure the supply required will be available to generate the company’s revenue.

Conference attendees also had a chance to hear the latest developments in digitalization and ESG. “Leaders are continuing to prioritize digitalization as a way to increase data-driven transparency throughout the sub-tier supply chains,” according to Ms. Schultz. “But to achieve that transparency, organizations need to adopt common frameworks for digital process, data definition, and data integrity. In addition, companies are increasingly focused on ESG strategies as a competitive advantage with both employees and customers.”

Panelists noted that workforce development and access to qualified talent continue to be challenges for companies. As older workers retire, leaders need to ensure that legacy knowledge is retained and passed along to a new, more diverse generation of professionals.

Event speakers also stressed that suppliers today must be aligned with their customers’ core values in order to succeed. Life sciences customers, they said, are looking for a supply base that represents the patient population they support, and they need to make their supply base decisions accordingly. One medical device company noted that it is a patient-centric company with high expectations for its suppliers, adding that if a supplier doesn’t deliver for it, then the company can’t deliver for its patients.

Forecast 2023, Part Two: PLM Trends Will Remain Focused on Digital Transformation

Over the past two decades, product lifecycle management (PLM) has become increasingly important to ensure not only the effectiveness of a company’s supply chain management but also the ultimate success of products in the marketplace. In the year ahead, intelligent, cloud-based PLM digital solutions—incorporating the use of technologies like artificial intelligence, machine learning, and the Internet of Things (IOT)—are also expected to play a crucial role in fostering product optimization and innovation, especially in the face of continued economic challenges.

PLM Digital Solutions

Used by manufacturers to manage the development of complex products, such as medical devices, PLM traditionally may refer to both the strategic process of managing a product’s journey from conception through the end-of-life (EOL) stage and the software used to manage the data and processes for each lifecycle stage across the supply chain. Today, PLM strategy and software are inextricably entwined, and there is greater urgency than ever for companies to adopt effective software solutions to gain dependable, 24/7 access to the complete range of data associated with a product—at all lifecycle stages.

According to data gathered by PTC, “the majority (63%) of manufacturing organizations believe that, without upgrading or reinvestment, their enterprise software systems will remain competitive for roughly two to three years. This means that any organization that upgraded in 2020 before, or at the start of, the pandemic, will likely be seeking to reinvest in its software solutions, [including] around product lifecycle management.”

As companies increasingly upgrade to cloud-based software-as-a-service (SaaS) platforms, they can ensure that a product’s sustainability and cybersecurity needs are addressed and incorporated into every product lifecycle stage, from ideation to EOL.

For example, PLM software tools can help ensure that products are “sustainable by design,” according to PTC, “using no more material than is physically necessary,” and the use of artificial intelligence can ensure that only the essential materials are being used to create the strongest design. Such technology tools can also help ensure that components are designed to facilitate their disassembly, reuse, and recovery at EOL.

In today’s environment, design- and engineering-focused product teams also require strategic insights for managing risks in their supply chain, particularly with an eye toward components or parts scheduled for EOL, according to manufacturing services company Jabil, which noted that “predictive analysis helps to identify the technology changes that are on the horizon so that necessary modular redesigns get traction early enough to help the OEM maintain leadership and competitiveness in their market.”

PLM Use Cases

Heading into 2023, executives are recognizing that PLM is perhaps more important than ever, as companies continue to face economic uncertainty due to war, inflation, lingering challenges from the receding COVID-19 pandemic, and ongoing supply chain issues.

A recent article by engineering.com notes that the use of intelligent PLM software and processes helps companies achieve and access data standardization and consolidation, cross-business integration, improved user experience, and cross-platform analytics—all necessary to drive innovation and sustainable business resilience.

According to experts like Oracle, PLM software and IOT are being used for a variety of use cases, which include:

Seamlessly integrating data and processes in supply chain systems to develop a holistic product development strategy
Driving faster innovation to launch by more efficiently designing, developing, and managing new product introductions and engineering change requirements
Enforcing product compliance and tracking changes throughout a product’s lifecycle to adjust to changing global standards

Additionally, both Oracle and engineering.com note that PLM will play an important role in supporting the use of digital twins, or the digital representation of products, for tasks such as running virtual what-if scenarios, predicting the cost or benefit of product modifications, and ensuring optimal product performance.

“Going forward, virtual twins are becoming more realistic, more accurate, more predictive, more dynamic, and more timely representations of the real,” said engineering.com, noting that effective digital twin management implies robust lifecycle management.

This approach to using technology to monitor product lifecycles, especially with an eye toward EOL, is at the heart of what Dynamic Technology Solutions does when it evaluates and recommends technology solutions to maximize the lifespan of components used in mission-critical systems. To find out how this could work for your products, watch Dynamic’s Product Lifecycle Management case study video and download its Technology Asset Lifecycle Management Solutions fact sheet (PDF).

2023 Forecast: Technology Investments Will Offset Continued Supply Chain Disruption

As we start the new year, disruptions to supply chain operations, including geopolitical conflicts, inflation, and labor shortages, are expected to continue. “In the year ahead, a second wave of unplanned supply chain risks will likely be realized,” notes KPMG, which reported that 71% of global companies highlight raw material costs as their number one supply chain threat for 2023.

In this environment, organizations may have limited access to manufacturing materials, replacement components, and maintenance items. Increased energy costs and price surges may also make manufacturing challenging and prompt global corporations to reevaluate their manufacturing operations and consider shifting them onshore, KPMG said.

KPMG’s survey of global organizations also showed that:

More than 60% expect that geopolitical instability will have a detrimental impact on their supply chains in the next three years
Nearly half expect cybersecurity to be an important operational challenge for their supply chains during the next three years
67% believe meeting customer expectations for speed of delivery will be a critical factor affecting the structure and flow of their supply chains over the next 12-18 months
Some plan to invest in digital technology to bolster their supply chain processes, data synthesis, and analysis capabilities
54% plan to increase their focus on sustainable sourcing

Technology Trends to Watch

To address supply chain disruption, companies in recent years have invested in cloud-based digital transformation strategies to improve the sophistication of their supply chain planning, visibility, and risk management, and this key technology trend is expected to continue in 2023.

Another digital trend likely to have a significant impact this year is the Internet of Things (IOT), according to the Association for Supply Chain Management’s Top 10 Supply Chain Trends 2023 report.

The IOT — a network of connected devices that facilitates data collection and communications — provides real-time smart logistics information to supply chain managers about product location, movement, estimated time of arrival, and temperature conditions. With data-driven insights generated by IOT, companies can optimize their supply chain networks and control costs, gaining a competitive advantage.

Companies are also turning to mobile and stationary robotics to assist workers with warehousing and transportation and as a result, are transforming supply chains. “Safer, more efficient warehouses, with fewer people in them, will drive down costs,” ASCM reported. “Although the initial capital investment will be high, the cost savings are primed to be dramatic.”

Additionally, organizations should be reevaluating their transportation planning systems in the coming year to identify logistics vulnerabilities. This effort will ensure that supply chain stakeholders are collaborating in an integrated way and adapting plans based on real-time information. “Logistics organizations must create the conditions necessary for a seamless interaction among multiple transportation networks and their digital replicas. They also should be rethinking the physical connections among warehouses, highways, ports, waterways, and air transportation,” ASCM said.

Other digital transformation trends that became prominent during the COVID-19 pandemic (which we’ve covered in previous blog posts) and are set to continue in the coming year include data analytics and artificial intelligence (AI), data security, and sustainable supply chains.

Cyber Risk Mitigation Remains a Priority

As companies consider upgrades to their digital systems and invest in new technologies in 2023, they should be mindful of data security and managing cyber risk. Cyber criminals are becoming increasingly sophisticated when infiltrating supply chains.

“The supply chain can offer vulnerabilities that provide external parties with a pathway to get into your systems, particularly your supplier network,” explained KPMG. “Criminals could also hack in through basic warehouse equipment such as barcode readers or via internet of things (IOT) devices applied within your manufacturing and other operational sites.”

KPMG recommends that all companies consider the following cyber risk mitigation measures in 2023:

Identify strategies that your company and its partners must enact to mitigate cyber risk in your supply chain
Ensure that new third parties in your supply chain ecosystem undergo cyber risk assessments
Consider AI and machine learning when onboarding new suppliers to address threats such as email spam and phishing
Conduct a cyber assessment for all supply chain activities using IOT devices (e.g., storing data, managing inventory, tracking goods)

In the next installment of our 2023 Forecast, we’ll examine what trends are on the horizon for product lifecycle management and technologies—including End of Life (EOL) issues—that can help manufacturing companies foster innovation and drive competitive advantage.

Managing the Impact of Cross-Border Issues on Med Device Supply Chains

For decades, business schools taught the lessons of Just-in-Time (JIT), or lean manufacturing, famously applied by Toyota in the 1970s and expanded around the globe from there. JIT showed that when companies coordinated orders of raw materials and components with their production schedules that they increased manufacturing efficiency and decreased waste.

JIT has proved itself a valuable concept in supply chain management—that is, if you’re not dealing with cross-border issues that disrupt availability of supply.

The sudden restrictions on products that were instituted during the pandemic are largely gone, but managing the cross-border shipping of manufacturing supplies continues to cause headaches in many C-suites. The concept of “free trade” isn’t mentioned much these days due to the restrictions on Russian trade and the U.S. tariffs on Chinese imports. And one can’t forget that components shipped from your tier one supplier may not be restricted, but parts from a tier two supplier could have problems at customs.

This is especially true in the medical device industry. Supply chain obstacles due to border restrictions affect not only profits, but also the end users of those products who need them for their own health and welfare. “With many goods, from electronics and medical equipment to clothes and furniture being made in China, it is difficult to maintain open supply chains as long as geopolitical conflict intensifies and economic and security risks are high,” writes Darrell M. West of the Brookings Institution.

Taking a Proactive Approach to Cross-Border Complexities

There’s no easy solution to fixing a problem that can keep a vital component in your supply chain stacked in a port warehouse for weeks. For visibility into the supply chain, many companies address cross-border complexities with trade management software that’s regularly updated with the latest import/export compliance information.

However, software is no guarantee that the slightest overlooked detail won’t foul up a cross-border shipment, delaying production and increasing costs. Ultimately, disruptions can be avoided by relying on your software combined with using your experience in importing and exporting products to identify those key details that could create a roadblock.

For example, while you may have determined that a component from Germany is better priced than those available from other countries, current data may indicate supply chain issues, pointing you instead toward a French component which, while more expensive, can be counted on to arrive when you need it. This analysis reflects the concept of the agile supply chain, using current data to balance what’s needed from suppliers with short-term forecasted projections. It also includes information such as supply chain kinks that may be affecting suppliers, as well as new cross-border regulations that can slow down delivery.

This approach is just as relevant for components that are already on order from a supplier when a new restriction threatens to impede the order. One of the rules of agile manufacturing is that as soon as that type of problem is identified, alternative suppliers are lined up that can fill in. The lesson in both cases is that leveraging your digital capabilities using advanced analytics will help your business respond more quickly and accurately to disruptions and keep your supply chain moving.

So will constant communication. As Omni Logistics’s Carlos Escorcia wrote in a recent issue of Supply & Demand Chain Executive, “When it comes to cross-border shipping, there is simply no such thing as too much communication.” In fact, proactive communication with onsite and remote management, suppliers, carriers, and border officials is the best way to avoid supply chain issues.

Developing an overall assessment of supply chain risks and focusing on where border restrictions might cause delays before they occur can prepare Med Device companies for possible disruptions. To assess your company’s own supply chain risks, start with Dynamic’s Supply Chain Risk Scoring self-diagnostic tool.

The Chip Shortage May be Abating, but Med Device Companies Must Maintain Vigilance

While many industries — notably medical devices companies — have had to continually adjust their supply chains, or even delay production, to deal with an international shortage in semiconductor chips these past three years, that situation seems to be abating. Bain & Company, for example, recently reported that “some companies are starting to see relief.” And many observers were encouraged by the passage this past summer of the CHIPS and Science Act, which calls for the investment of more than $52 billion in U.S. semiconductor manufacturing, research and development, and workforce training, as well as another $24 billion in tax credits for chip production over 10 years.

This investment is intended to protect overall manufacturing. At present, only 12% of chip factories are in the U.S., while 75% are in East Asia. Reducing microchip imports will help stabilize medical device supply chains, which have been vulnerable to suppliers based in only one part of the world.

Looking forward to the implementation of the CHIPS Act, the Advanced Medical Technology Assocation (AdvaMed), the world’s largest trade association representing medical device manufacturers, is advocating that the U.S. government prioritize the delivery of chips to the medical device industry. World leaders outside of Asia are also playing their part. Having seen the threat that the microchip shortage had on products that protect their own citizens’ health, the European Commission recommended its member states address the chip shortages immediately and work with chip manufacturers to prioritize producing semiconductors for healthcare.

Preparing for Future Shortages

But those developments, while positive, don’t mean medical device manufacturers — nearly 80% of whom have reported production delays — no longer have to worry. Lessons from the past three years indicate not only a need for vigilance, but also for preparation.

Given the importance of chips used in medical devices, which must be reliable and able to handle power spikes, maintain security, and comply with privacy regulations, finding alternative vendors remains an issue, especially when the chips in question are “mature” — older and not as cutting-edge as the latest chip designs. Chip manufacturers would prefer producing newer microprocessors with a greater profit margin, and may not be interested in the medical technology market, which only uses about 1% of microchips sold.

One such manufacturer, Baxter International, which has several products that use multiple semiconductors, has lobbied its suppliers to prioritize manufacturing chips for the medical device industry in order to keep up with the demand from patients and healthcare providers. Other companies, such as Hologic, which uses only a few hundred chips per month in its production process, have had to reduce their use of microchips while working with their technology vendors.

The message: Given the experience of the past three years and despite encouraging signs, maintaining readiness remains critical in order for medical device companies to reduce the impact of another supply disruption. Here are some suggestions for how to prepare:

Reduce Supply Vulnerability – A survey by Deloitte showed that 70% of medical technology companies received more than half of their semiconductor chips from one vendor. Buying large volumes from one supplier can provide significant discounts, but it obviously leads to problems when that vendor can’t deliver their promised shipments. Regular supply risk assessments can help find developing issues before they become problems, as well as increasing supply inventories and finding alternative vendors before they’re needed.

Maintain End-to-End Visibility Throughout the Supply Chain – According to Gartner, supply chain forecast accuracy has improved as more companies incorporate analytics into their production. But a deeper, end-to-end visibility helps get an accurate picture of both future customer demand and component inventories. Supply reliability solutions that align with a vendor’s system may not have prevented the chip shortage but they could have alerted medical technology companies earlier in the crisis.

Partner With a CMO – Original equipment manufacturers developing partnerships with contract manufacturing organizations (CMO) closer to target markets can simplify inventory management, according to Ralph Tricomi, director, market development for Web Industries. Ideally the partner CMO has the market knowledge and supplier relationships to acquire the microchips needed to continue production.

Increase Awareness of Medical Technology – As AdvaMed has shown, advocating for medical device manufacturers to receive its supply of microchips is critical. Maintaining communication with governments whether through trade groups or individually about the essential nature of microchips in medical devices and the impact of the shortage on public health is essential, even as the shortage eases.

With chip manufacturers building more factories and capacity, and the CHIPS Act boosting U.S. production, the worst of the recent shortage is probably over. This microchip crisis may not be the last one to impact medical device manufacturers but it’s probably safe to say that the industry is better prepared for the next one.

Measuring Progress on the Road to Supply Chain Resilience

Not long ago, supply chain issues were a concern mainly limited to operations professionals. But in the past two years, supply chain disruptions have moved up the agenda and are now widely discussed in C-suites and even the highest levels of government—essentially, because of their widespread economic impact. Even the White House has weighed in, with an order last year saying, “The United States needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security.”

The call to action to improve supply chain resilience has been loud and clear. And now, some recent surveys provide a snapshot of what companies have been doing in response, and what they plan to do.

For example, while companies are exploring a variety of new strategies for resilience, many have simply turned to a traditional approach. The most common approach to coping with disruptions over the past year has been to increase inventories of components and finished goods, according to a recent survey from McKinsey & Company, which reports that 8 out of 10 respondents increased their inventories last year.

Budgeting for Supply Chain Resilience

That approach can be effective but brings its own challenges in terms of paying for and maintaining that inventory. And it seems that many companies have seen it as a short-term, expedient solution and are now looking at other approaches. McKinsey reports that 90% now want to increase their supply chain resilience, and almost three-quarters expect to increase their budgets to accomplish that goal.

Meanwhile, many companies are planning to make “wholesale changes” to their supply-chain footprints, according to a study from the Interos supply chain technology company. It notes that 89% of surveyed executives think their suppliers are too concentrated in certain geographic locations and that 51% have plans to reshore or nearshore suppliers.

Other strategies beyond building buffer inventory include dual sourcing and engaging two suppliers for each component, which has now been implemented by 81% of respondents in the McKinsey survey, compared to 55% the year before. Forty-four percent are developing regional supply networks—presumably to shorten supply chains to reduce risk. That’s up from 25% the previous year. Many executives expect to continue to work on dual sourcing (69%) and regionalization (51%) through this year and beyond. From Dynamic’s perspective, this suggests that they see supply chain disruptions and risk as ongoing challenges in managing the supply chain.

Just Getting Started on Managing Supply Chain Risk

Companies are doing a lot to strengthen the supply chain, but they have a lot more to do—particularly on the risk-assessment front. The Interos study found that only 57% of suppliers are usually evaluated during a risk assessment. In addition, just 11% of respondents said that they monitor supplier risk on an ongoing basis.

These findings underscored the need to look further up the supply chain to understand risk, with 76% saying they have been affected by risk events occurring beyond second-tier suppliers—that is, their suppliers’ suppliers. McKinsey echoes that problem, noting that 45% of respondents in its survey can only see up the supply chain as far as their first-tier suppliers or have no visibility at all into the upstream supply chain.

Industry surveys show that the turmoil of the past few years has been a tremendous motivator for change, and supply chain professionals are working to increase resilience. There is progress being made and more is needed—and companies have clearly found powerful reasons for moving forward.

Supply Chain

Boosting Supply Chain Resiliency with Data Analytics and Artificial Intelligence

Coming out of the COVID-19 pandemic, many organizations are considering digital transformation as the key to ensuring supply chain resilience. Evolutions in technologies have enabled the creation of digital supply networks that can be used by companies to strengthen their procurement strategy. With new and emerging digital solutions involving artificial intelligence (AI) and analytics, companies now can harness their data to optimize inventory more effectively than ever before.

Even as the pandemic is receding, supply chain disruptions continue to be commonplace, and chief supply chain officers are under growing pressure to use and analyze real-time data to mitigate risk. According to a recent Forbes article, “43% of enterprises will continue to digitalize and integrate innovative technology into enterprise-wide systems. This means that in the coming year, the ability to augment operations and decision-making with data analytics will continue to be a transformative and highly favored capability.”

Forbes reports that implementing new data analytics capabilities is best considered as a series of digital initiatives, for which there are many options. For instance, the introduction of the metaverse is one solution that will greatly increase a company’s ability to deliver predictive insights across supply chain networks, enabling it to “reduce development times and risk, achieve higher operational efficiency, and improve resilience.”

Ensuring Continuity Throughout Disruptions

Companies are using analytics and AI to mitigate risk and ensure continuity throughout any global supply chain disruptions. These powerful tools help businesses automate tasks in a way they never could before, while gaining deeper insights for better, faster decision-making, according to Supply Chain magazine.

Supply Chain reports that digital twin technology is currently considered one of the most innovative uses of AI and data analytics in supply chains. A digital twin provides a virtual supply chain replica that enables scenario modeling to simulate the impact of disruptions, like market changes and natural disasters, allowing companies to determine how resilient their supply chain is. AI modeling also proactively identifies supply risk, such as a supplier’s inability to source needed materials, before it can become a problem.

Deloitte experts agree that “with improvements in data, analytics, computing power, and visualization, digital procurement has better evidence-based options for decision-making, which can improve both the value and accuracy of strategic decisions and the speed of execution.”

New disruptive digital supply chain technologies are altering the procurement function for the better. Deloitte recommends that procurement leaders invest in both:

Maturing digital solutions that are currently transforming procurement with minimal investment, such as cognitive computing/artificial intelligence, predictive/advanced analytics, intelligent content extraction, visualization, and crowdsourcing
Emerging digital solutions that could impact procurement in the future, such as block chain, sensors/wearables, cyber tracking, and virtual reality/spatial analytics

In the face of continuing disruption, companies must adapt to ensure supply chain resilience. Digital transformation is an incremental, multi-year journey. If your company has not yet created a digital procurement strategy and started this process, now is the time to consider the many AI and data analytics options available on the path to intelligent supply chain management.

The Supply Chain Connection with ESG Performance

Sustainability is a critical issue for many businesses, fueled by growing internal and external pressure to measure and strengthen environmental, social, and governance (ESG) practices. As companies seek to improve their ESG performance, supply chain management is also under scrutiny.

ESG issues relate to the supply chain in many ways. For example, companies are vulnerable to risk from the actions of their suppliers involving issues that include child labor, employee safety, and corruption and bribery. Supplier problems in those areas can create reputational damage for companies and even subject them to compliance and legal risks.

The environmental component of ESG is particularly relevant to the supply chain, which typically includes carbon-heavy activities such as transportation and production. The supply chain may drive as much as 90% of a company’s total carbon impact on the environment, according to the EPA. So there’s a lot of room for sustainability-related improvement in supply chains. This is driving a greater focus on companies’ so-called “Scope 3” emissions—those created externally, by other companies outside of the organization.

But it’s important to recognize that sustainability is no longer just a corporate-responsibility or compliance issue. It’s also a good business practice.

A Window into ESG Vulnerabilities

The key reason why sustainability has become more important to business is because it’s under scrutiny by a growing range of stakeholders. Studies show that U.S. consumers prefer sustainable brands and products, and employees are increasingly likely to say they would prefer to work at companies with strong environmental and social agendas. Institutional investors are also on board, and by 2025, some $53 trillion—about one-third of the dollars under professional management globally—is expected to be in ESG funds, according to Bloomberg Intelligence.

Altogether, this means that sustainability is now playing a big role in meeting customer expectations, attracting and retaining employees, and accessing capital. Improving supply chain sustainability can help ensure that a company finds favor with these stakeholders.

But greater sustainability can also help improve supply chains because it goes hand-in-hand with reduced risk and increased efficiency. Sustainability and efforts to cut carbon emissions typically mean using less raw material, reducing energy and water consumption, and cutting the amount of waste that needs to be processed — actions that help reduce costs and accelerate operations. Tracking ESG data also provides a better window into potential vulnerabilities in the supply chain. And companies that put efforts into supply chain sustainability are likely to find it easier to forge relationships with quality partners who are looking to improve their own supply chain ESG performance.

“Supply chain agility and resilience are inseparable from the drive for sustainability,” a recent report from The Conference Board noted. “Building sustainable practices into supply chains has direct business benefits. It helps companies manage business risks, achieve cost savings through material efficiency gains, enhance brand reputation, create growth opportunities, and manage suppliers more effectively. Harmful environmental practices and inhumane working conditions not only pose reputational risk but also direct disruption risk.”

In the end, supply chain sustainability should not be seen as a burden or peripheral issue. Instead, it’s fast becoming something that is central to sound supply chain management. And it is another area where the supply chain can make a big contribution to competitiveness—and to the health of the planet.

Supply Chain Environmental sustainability Transportation

Avoiding Supply Chain Imbalance Through Collaboration

When we think of supply chain disruptions, we usually only consider the shortages that became familiar during the pandemic—back-ordered or unavailable parts, empty store shelves, long delays in shipping and fulfillment. But it seems that many companies are now experiencing the opposite, in the form of significant excess inventory.

This problem is having an impact in a variety of industries, with overall manufacturer and trade inventories in June being up 18.5% compared to the previous year, according to the U.S. Census Bureau.

Every company is different, but many appear to be experiencing inventory imbalances driven by abrupt changes in either supply or demand, or both. Managing inventory is always challenging, but the volatility of the past two years has made it especially difficult. As supplies ran short during the pandemic, many companies boosted orders to build buffer stocks. Now, with demand subsiding somewhat—or shifting to different products—some of those companies are left with too much inventory. This can lead to excessive amounts of capital being tied up in goods, along with other carrying costs for things such as storage space and insurance. And for companies focused on innovation, excess inventory increases the potential for product obsolescence, as components sit on shelves waiting to be used.

Taming Supply Imbalance

What can companies do to reduce inventory imbalances in the future? There is no simple answer, but they can take steps such as tightening their inventory-accounting practices to gain a more timely, detailed view of the materials they and their suppliers have on hand. This can help them understand how well inventory is aligned with demand. Additionally, they can change their ordering patterns to focus on smaller, more frequent purchases; making it easier to respond quickly to changes in demand. They can also conduct assessments that proactively identify potential risks in the upstream supply chain.

More broadly, companies can re-examine just-in-time practices and look for ways to use targeted, carefully managed buffer inventory to reduce their vulnerability to shortages. Or they can consider structural changes to the supply network, including reshoring to reduce reliance on long global supply chains and bringing more suppliers into the mix to expand sourcing options.

Looking forward, effectively managing inventory imbalances in an era of “disruption as normal” will require increased visibility across larger portions of the supply chain. Here, companies can consider technologies ranging from EDI to supplier portals and cloud-based supply-chain platforms that let partners work together to understand supply and demand to optimize inventory levels.

In the end, however, the best tool for avoiding inventory imbalances will be relationships that allow partners up and down the supply chain to communicate and collaborate to identify imbalances early on. For many, this will call for new ways of working with partners to share information about risks and disruptions in production and logistics; about the design of new products; about products reaching the end of their lifecycle; and about changes in end-customer demand.

To a great extent, inventory imbalances are the result of uncertainty. Strong relationships that foster greater information-sharing will be key to cutting through that uncertainty to keep inventories at levels that will meet the needs of companies and customers alike.

manufacturers pandemic inventory Supply Chain

Strengthen Product Supplier Partnerships to Address Current Supply Chain Dynamics

As supply chain constraints have shifted traditional buyer-focused procurement and supply-chain systems into being more supplier-focused, some procurement experts are calling 2022 “the year of the supplier.” Businesses today are facing pressure to diversify and localize their supplier base, putting manufacturers in a stronger position.

In this new landscape, companies are increasingly adopting a supplier relationship management (SRM) approach to create better working relationships. This mindset envisions the buyer-seller dynamic as an active partnership that can bring value to your company.

When correctly implemented, SRM creates a mutually beneficial relationship where your organization and its suppliers are working together to reach common goals. It helps supply chain managers ensure safety, security, compliance, and cost savings at all stages of the process.

To adopt an effective SRM approach, four strategies suggested by operations services provider Symplr include:

Learning about your suppliers
Educating them about your organization
Communicating and keeping them informed about the big picture
Setting clear expectations and KPIs and checking on them regularly

It also makes sense that in a world where companies are highly focused on managing how customers, employees, and the general public experience their brand, they extend that focus to the supplier experience as well. In today’s supplier-focused market, some companies are going beyond SRM to practice supplier experience management (SXM), which engages suppliers through many different components like bidding, information management, communication, insights, and support.

Organizations can improve the experience they offer to suppliers by creating an SXM road map, mapping out supplier journeys through your systems, designing a supplier communication plan, and adopting new digital solutions, among other steps, according to a recent article by global management consulting firm Kearney.

Ultimately, it’s no longer sufficient for companies and product suppliers to adopt distinct buyer and seller roles. In the new supply chain environment, both must be focused on developing authentic partnerships to succeed.

Dynamic stands ready to help you with this process and serve as a true strategic partner in your supply chain’s success. We acquire products only through OEM-authorized channels. Our expertise and connections with more than 800 technology providers can help your company realize supply chain savings and plan ahead for important events including product End of Life (EOL).

Learn more about Dynamic Technology Supply Chain Management solutions.

Supply Chain product end of life manufacturers suppliers supplier relationship management