Albert Einstein once said, "Insanity is doing the same thing over and over again and expecting different results." I can't help but think of this quote whenever there is some kind of disruption in the electronics supply chain that leaves many OEMs and EMS providers scrambling for parts to keep their production lines running. It seems that is the only time they recognize the importance of supply chain continuity.
While there is an increasing appreciation of the supply chain as a potential competitive differentiator, there is still a tendency among many companies to build their supply chains around one thing: efficiency, in the form of the lowest price. This approach is adequate when it is a buyer's market, but when the tide turns, these companies discover that they have no capabilities for conscious tradeoffs between efficiency, agility, or responsiveness until it is too late.
Unfortunately, despite what I am sure are the best of intentions, many don't follow through on their pledge to be "better prepared next time." After the crisis passes, they become complacent and don't do the analysis required to define their supply chain goals and segment their supply chains based on identified threats. Before long, they are right back where they started, trading security for a few small cost savings per part, until the next emergency arises -- same story, different disaster.
It's a vicious and self-defeating cycle, but it doesn't have to be that way. A supply chain built for continuity is not only safer and more cost effective, but can provide a significant competitive edge. There will always be those unforeseeable events that will throw the global supply chain out of balance. But if you have a supply chain built for competitive advantage, and you have collaborative relationships with your supplier and distribution partners, you can diminish the downside impact while boosting your position in the market. Bottom line: Do you want to be scrambling for parts or reaping the rewards of a strategic and sustainable supply chain model?
At Avnet Inc. (NYSE: AVT), we recommend customers perform regular assessments of their supply chain strategy and risk. This entails the following:
- Determine supply chain goals based on an outside-in customer view
- Determine the tradeoffs between efficiency, agility, and responsiveness
- Identify the primary sources of risk in your supply chain
- Assess the likelihood of occurrence
- Estimate the financial impact
- Prioritize your supply chain based on the likelihood and impact
- Develop a strategy to mitigate or reduce the likelihood of disruptions
- Review supply chain strategy periodically to assure continuous improvement.
Remember, mitigating supply chain risk isn't just about holding extra inventory. There are many strategies that can be employed to bolster the sustainability of your supply chain, including buffer capacity, dual- and multi-sourcing, delayed differentiation, component commonality, and process standardization.
So, what do you think? Will the recent surge in concern for supply chain continuity be another flash in the pan, or will customers finally break the cycle and put supply chain continuity at the top of their to-do lists?