This article is the first installment of the 2021 Automation supply chain update.
View the rest of the series here.
Beyond expanding inventories, shoring up the structures that allow supply chains to operate are equally vital to their long-term survival.
"We wish we could say that COVID-19 is behind us, but we're not there yet. We're all having upstream challenges with our manufacturers and partners, and dealing with associated price increases due to scarce raw materials and other after-effects," says Frank Cantwell, VP of product and supplier management at Allied Electronics & Automation. "Everyone's in the same boat—literally as we had to shift from air freight to sea freight—and dealing with the same delays in container deliveries and other pressures. We're also dealing with communications challenges; one of the biggest gaps is finding out when products are going to get through, so we can alert our customers."
Cantwell reports one partial remedy for these latest supply chain symptoms is more flexible business practices built on virtual environments, which Allied already had and continues to extend to its personnel. "We didn't have the same capacity as we have now, but having some virtual business infrastructure in place meant we didn't have to pull back and redo. This makes it easier to flip to better standard operating procedures (SOP), scale up, and increase market share," explains Cantwell. "For instance, if you're not using Zoom or Microsoft Teams, you're an outsider because customers' expectations have changed, and suppliers must be able to work in whatever setting that users choose."
Ty Golden, supply chain director at Allied, adds that, "In any dynamic environment, it's useful to expand data acquisition methods, tap into big data, and manage enterprise resource planning (ERP) with materials plans and communicating with customers. But now, they want to order and receive as close to real-time as they can get, but that's hard to do on the phone or via email."
By expanding its online and virtual capabilities, Cantwell and Golden report that Allied increased its available products, transactions and volume over the past 18 months, reached $650 million in revenue, and increased its April-June sales by 40% over the previous year. It also opened a new distribution center recently, doubling the capacity of its facility in Fort Worth, Texas (Figure 1).
Websites and personal contacts
To maintain relationship and gains sales despite COVID-19, Allied's Cantwell and Golden recommend that other suppliers, manufacturers and businesses:
- Maintain and enhance their websites with increased data processing bandwidth and other robust capabilities, and continually strive to improve the user's experience (UX);
- Increase and expand their product lines and availability with improved distribution; and
- Maintain local sales teams to provides flexible services, preserve relationships with existing clients, and attract new customers.
To alleviate the impact of these changes, Golden and Cantwell add that Allied relies on relationships with its customers and supplier partners that were often built over many years. "We can hold inventory for customers to limit their exposure if they've been stretched and stressed lately by their downstream customers that rely on them," explains Cantwell. "We have about $160-170 million in inventory right now, but this situation would have been much more challenging if we'd been running lean before the pandemic hit."
Golden adds, "We still hold regular calls with our partners, though our conversations got more colorful as market dynamics became more challenging. However, because we already have well-established communications and everyone is part of our usual business model, we don't have to create new ways to communicate when adversity happens, and can instead focus on root causes and solutions. Trying to open new lines when a high-demand event or another problem occurs is too late."
