Over the last year, UK consumers have become increasingly aware of the impact of COVID-19 on retail supply chains. While the panic over empty supermarket shelves at the start of the first lockdown has subsided. In places concerns still remain over the resilience of our UK supply chains. With the UK leaving the European Union, Brexit is one key issue that we’ll see running alongside the impacts of COVID-19 for many months to come. December saw queues of more than 2,800 lorries in Kent, demonstrating the logistical threat to distribution arms making use of the Port of Dover. Others across the country have suffered major pandemic-related difficulties, with stocks of government PPE at Felixstowe blamed for shipping delays over Christmas. The December incidents could be considered transitional teething problems, yet issues continue. Nissan paused production at its Sunderland facility in January, citing ‘supply chain disruption caused by the COVID-19 pandemic’ and, while the UK government’s acquisition of 367 million vaccine doses has been a success story, manufacturers have generally grappled with supply chain difficulties. The situation is hitting smaller businesses, manufacturers and distributors hard too. BBC News recently reported that 71 pages of paperwork were required to approve one lorry of fish going to the EU, undermining a company’s promise to get fresh fish from ‘port to plate’ in just 24 hours. These stories are the consequences of multiple threats to the supply chain, and a stark reminder that businesses need to have resilience plans in place. The legislative hoops of Brexit have constantly changed; COVID-19 was unimaginable to many before 2020. It’s not about a ‘best-in-time’ approach, but about being the best we can be: more robust, more agile, better protected, and better prepared for unforeseen circumstances.
While every organisation is different, there are broad links within every supply chain that need to be managed, from sourcing and manufacturing, to distribution, shipping and receiving, then reverse logistics as returns, recycling and disposal are managed. In simple terms, the link between each is clear. If you can’t source a product, you can’t manufacture or distribute it; if you can manufacture a product but can’t distribute it, you’re stuck with a filling inventory and unsatisfied customers. If you can get products into a country but not out, your inability to deliver on a returns policy will cause legal, financial and reputational headaches. Strengthening the supply chain to resist threats to these links is of paramount importance. It’s not just a case of cost and supply, but about recognising the threats and their impact on different elements of the supply chain. Businesses intent on futureproofing need to either strengthen priority links or develop a plan to mitigate the impact when they break.
The pragmatic benefits of stress testing are obvious: you tackle the threats to your supply chain before they happen
The importance of stress testing
Stress testing – or performance testing – of the supply chain has never been more important. From my experience speaking to manufacturers across the UK and internationally, it’s a fundamental step in validating their readiness to begin production. Stress testing is a process of identifying the maximum pressure that each link in the supply chain can take to identify the links that need to be strengthened as a priority. By simulating specific scenarios that could threaten each element of the network, from manufacturing errors to shipping delays to legislative change, organisations can understand the risks they face and the potential threat to their operation. The process is unique to every company, but should be built upon the same foundations: Planning and coordination – a framework for testing. The job of each user, the types of transactions taking place and the equipment used to execute them should all be set in stone to understand exactly what the results mean. Communicating effectively – an open line of communication is paramount for every user involved in the stress test. Ideally, a stress test manager will be able to log queries and questions from everyone involved as they take place. Production server – a network environment should be set up to closely resemble the company’s production server, rather than relying on training and development data. The scenario needs to be as close to reality as possible, using the same network structure. Third-party systems- this process also needs to accommodate the outsourced elements of production.
A long-term commitment
The pragmatic benefits of stress testing are obvious: you tackle the threats to your supply chain before they happen. To take the aforementioned example of Nissan, the Japanese manufacturer has committed to building EV batteries in the UK. This avoids the legislative frustrations of ports learning to navigate Brexit, while diversifying its component supply chain, reducing the risk to its sourcing department. In the longer term, however, it’s a process of continuous improvement, not one of quick fixes. By continuously identifying a new priority for development, organisations are able to gradually but consistently raise the quality of their supply chain in every department. A commitment to regular, comprehensive stress testing will result in driving up the durability and agility of the supply chain across the board, helping an organisation to protect itself during a period of near-unparalleled uncertainty.
A catalyst for industrial transformation
This is particularly important in regard to new technologies, which demand a thorough audit before being introduced. Take Industry 4.0 and the introduction of a multitude of IoT equipment as an example. The industrial IoT technologies need to ‘speak’ to one another, but this network has to be able to correctly ‘voice’ the performance of the manufacturing floor. What we have witnessed with COVID-19 is the acceleration of this type of digital transformation, as organisations scrambled to re-design business models. Manufacturing organisations in particular have had to evolve rapidly and, according to Gartner, around a third (36 percent) have already realised above-average business value from IT spend in digitalisation. The benefits of industrial transformation are there, but they won’t be realised overnight. Stress testing is a holistic commitment to higher standards of quality, enabling the quicker integration of digital technologies that improve the cost-effectiveness of manufacturers, while at the same time identifying and mitigating – or even eliminating – the obstacles that threaten them.
Andy Coussins, SVP & head of international, Epicor