Adapting to Supply Chain Disruptions in 2023
Rising inflation continues to cause disruptions.
As the Federal Reserve continues to increase interest rates to slow the rate of inflation, more than 60% of the economists in recent polls believe the US will enter into a recession in 2023. As this news works its way through sales forecasts and into MRP demand, the post-pandemic push to recover schedules and restock depleted inventories will transition to a cash preservation strategy through inventory reductions. How do you manage supply chain disruptions when the ‘traffic lights’ are quickly cycling between green and red?
The supply chain disruptions in the past few years are the most extreme experienced by the majority of the people in the industry. Most management systems and review processes established to react to changes in market forces have been stretched beyond their limits. The traditional annual review process is incapable of keeping up with the changes resulting in strategies and targets out of step with the current market environment.
The lesson is that supply chains must be more responsive to disruptions. Organizations need to adapt to this environment and recognize that disruption is the ‘new normal’. The current process of spending weeks preparing reports and analyzing data to deploy a strategy that takes months to implement is no longer viable. By the time these strategies are defined, cascaded, and implemented, months are lost with order policies that are steering organizations in the wrong direction.
To thrive in this environment with frequent disruptions, supply chain strategies need to be monitored continuously to identify disruptions and adjust the recommended order policies accordingly. Thresholds need to be established for demand, variability, and lead times that automatically recategorize parts. Once recategorized, buyers need to be notified immediately so they can begin realigning their parts to the defined strategy. Given that a single forecast update can impact numerous parts, the parts with the greatest impact need to be prioritized so that buyers know which parts to address first.
An advanced Plan for Every Part, or PFEP, is one of the crucial supply chain strategies for being active and responsive to disruptions. As an integral part of lean manufacturing, the PFEP helps supply chain leaders optimize the way each part of the product is procured. It ensures the inventory and procurement policies maximize both material availability and profitability.
Why is it so important to have a Plan for Every Part? Well, the PFEP keeps your ERP system tuned at its best allowing organizations to get the most value out of their investments. Aligning your buying practices for the current changes in demand can free thousands of dollars in trapped inventory that can be invested to drive more shareholder value. Having an established PFEP allows organizations to realize these opportunities.
While having a Plan for Every Part is absolutely essential for adapting to supply chain disruptions in 2023, some issues can occur when the PFEP is not set up properly or kept up to date. To properly set up the Plan for Every Part, organizations needs the following things:
- ABC Classification
- XYZ Rank (aka Demand Variability Analysis)
- Master Data (such as item-level lead time, lot size, minimum order quantity, and more)
Without proper practices being put into place, supply chain leaders risk not getting the full benefits of these tactics. Organizations should consider their tech stacks and whether their current tools support their plans or if new technologies should be introduced to optimize buyer efforts.
Some advanced technologies have the capabilities to address challenges within the PFEP. Items can be reevaluated every day to ensure they are aligned to the defined strategy. Reports can automatically identify which parts are not compliant and prioritize so that buyers know which items to address first. It is all a matter of finding the right technology to fit your business needs.
OFFLOADING THE ANALYSIS, TASK ASSIGNMENT, AND REPORTING
Allows teams to focus on delivering results versus trying to make sense of how they should react to the news of the latest disruption.