Strengthen your immune system with OptimalPlus: Handling supply chain disruptions

Lots of things have been thrown out of whack since the COVID-19 outbreak. One of the biggest negative effects in manufacturing has been the severe supply chain disruptions–making it painfully obvious just how vulnerable manufacturers are when links in the chain come loose. Goods aren’t being delivered, employees are in lockdown, suppliers have shut down, and customer demand has plummeted. Businesses around the world are on shaky ground and looking for ways to regain their footing.

In this article, we take a look at the impact COVID-19 is having on manufacturing supply chains and explore three powerful tools that are essential to surviving and thriving in this new reality. This article is part of a series that discusses the pandemic’s effect on manufacturing and provides essential methods and strategies to help you deal with the crisis more effectively.

Why the supply chain Is going berserk

Nearly 100% of Fortune 1000 companies are experiencing supply chain disruptions.

COVID-19 is taking a heavy toll on supply chains around the world. This situation is affecting everyone, with an alarming 94% of Fortune 1000 companies currently experiencing supply chain disruptions. But why are supply chains taking such a hard hit?

The most obvious reason is that factories are shutting down, with automakers in Europe and the US announcing temporary closures. Meanwhile, the US Semiconductor industry is lobbying federal and state governments to be able to continue operating. But even factories that remain open are facing significant fluctuations in their workforce. With many workers either quarantined or laid off, healthy employees have become a rare commodity.

The domino effect

Manufacturing relies on a highly interdependent chain of collaborators, making businesses much more vulnerable when a global catastrophe hits.

Another major cause of supply chain disruptions is the interconnectedness of it all. Factories do not operate in a vacuum. In fact, nothing could be further from the truth. Operations rely on an intricate web of tier-1, tier-2, and tier-3 suppliers, spread across the globe. Disruptions in one site lead to butterfly effects that can result in material shortages, changes in demand, shipping disruptions, delayed time to market, and even complete shutdowns. Fiat Chrysler Automobiles, for example, was forced to temporarily stop production in Serbia in February because it could not obtain parts from China. Hyundai ran into a similar problem with its factories in Korea.

Manufacturing relies on numerous collaborators that are inextricably bound to one another, and this makes businesses much more vulnerable when a global catastrophe hits. Shortages and disruptions lead to fierce competition over supplier resources. However, in the long run, success doesn’t spring from being the most ferocious player in a dog-eat-dog world. Instead, it comes from having a smart strategy to deal with uncertainty.

Manufacturers can use this time wisely, taking steps to not only mitigate losses but also establish an infrastructure that will ensure operations work better when the crisis is over–and are more resilient and prepared for when the next one hits.

Difficult times call for strong partnerships

Partnering with third-party platforms is essential to overcoming crises like this.

In times like these, tackling complex phenomena such as supply chain disruptions can seem like a daunting task. However, manufacturers don’t have to handle such issues on their own.

In light of recent developments, IDC has argued that using third-party platforms to digitize and accelerate manufacturing is no longer optional but in fact imperative to overcome a crisis like COVID-19.

OptimalPlus is one such platform that both augments your day-to-day operations and provides you with the critical tools needed to survive and flourish in times of disaster and extreme uncertainty.

Tackling the supply chain crisis with O+

Given the sheer complexity of the situation, manufacturers should focus on three prevailing goals: transparency, agility, and quality control.

In our previous blog, we discussed the four stages of the COVID-19 crisis: the crisis itself, the aftershock, the recovery ramp, and returning to business as usual. Supply chain challenges will change at each stage, and manufacturers have to know how to tackle each one. This is not, however, a straightforward process.

A complicating factor in any pandemic is that different regions and countries will progress through the crisis at a different pace. To make matters worse, unexpected events may lead to regulations oscillating from being more strict to more lax and back again. In light of this, the best strategy to handle supply chain challenges, beyond preparing for each stage of the crisis, is to focus on three major objectives: transparency, agility, and quality control.

Let’s take a look at the importance of each of these and how OptimalPlus’ platform can help you achieve them.

Figure 1: Countries are going through the crisis at a different pace (Source: McKinsey & Company)
Figure 2: Countries are going through the crisis at a different pace (Source: McKinsey & Company)

Transparency

While companies usually have a general idea of their tier-1 suppliers’ shipment schedules and production, most know little about their suppliers and customers further up and down the supply chain. In a crisis like this, these knowledge gaps pose a huge problem.

Especially during a crisis, supply chain visibility helps keep your business safe. Transparency allows you, first and foremost, to understand how your suppliers and subcontractors are spread out geographically, enabling you to assess potential business risk, predict delays, execute mitigation strategies, develop routes to alternative suppliers, and more. But to achieve this, you need an independent view of supplier activity for a clear picture of what’s really happening.

OptimalPlus provides you with such a bird’s-eye view. The platform collects data across the entire supply chain in real time and unifies everything in one repository. Building on this centralized data, the platform then generates objective and comparable dashboards that cut across your suppliers. This functionality also measures and tracks KPIs consistently across suppliers so that you can objectively compare their performance–a feature that can be particularly valuable when deciding on alternative sourcing.

In addition, assuming they have obtained the appropriate service and data access agreements, OptimalPlus customers can use the platform to intervene directly with their suppliers’ operations, especially for quality screening. Using OptimalPlus, customers can remotely deploy rules and machine learning algorithms directly from headquarters, based on a wider view of their entire supply chain network.

Agility

Volatile conditions require businesses to adapt quickly to changing circumstances and fluctuations in demand and supply. As operations start up again after the current downturn, things will be rocky and unpredictable for a while. To take one example, until air transportation returns to normal, there are expected to be severe bottlenecks in the automotive-semiconductor supply chain.

More than ever before, operations must be dynamic, ramping up activity when a shipment comes in and slowing down when shortages crop up. This kind of agility requires businesses to have a firm grasp of what’s happening on the factory floor and have the tools to adjust workflow as quickly and seamlessly as possible.

OptimalPlus’ software connects directly to the MES (manufacturing execution system), collecting and harmonizing data and monitoring crucial metrics. In semiconductor test operations, for example, the software provides real-time monitoring of operations and key KPIs such as throughput (units per hour, UPH), yield, first pass yield, and others. This gives you an immediately clear picture of the factory line.

Manufacturers can implement this platform for passive monitoring as well as process automation, creating and deploying machine learning rules to identify issues and respond to them automatically in near real-time. You can also easily create, publish, and modify these rules across the supply chain at the click of a button, allowing you to react to market changes quickly and with maximum agility.

Figure 3: Publishing Advanced Rules to the Supply Chain with OptimalPlus (Source: OptimalPlus)

Quality

Quality assurance is becoming more important than ever as the pandemic progresses. After the initial aftershock, companies will begin to recover, transitioning into high gear quickly. This could take a toll on quality, given that equipment has been idle and less well-maintained and employees may require time to regain their former know-how. You and your suppliers may also have used the downtime to refresh and replace equipment, train new employees, and upgrade systems and methodologies–all of which is intended to improve quality but can lead to quality issues in the short-term.

While disruptions and shortages persist, you will want to make sure that every scrap of material, every cog in the wheel, and every operation in the production line is functioning perfectly. To do so, you’ll need systems that collect and process data from the factory floor, algorithms that reliably and seamlessly detect problems, and solutions to identify issues on the spot–from detecting faulty equipment quickly and identifying outliers to preventing escapes and field failures.

OptimalPlus provides its clients with fully automated monitoring and alerts for operational and quality KPIs for each supplier (i.e., test and assembly houses). You can also use the platform to vastly improve internal and outsourced operations. The OptimalPlus platform integrates with other systems to prevent escapes, perform outlier detection, and automate your lot disposition workflow. The solution can even provide feedback from field failures, extracting failure signatures to prevent similar failures from ever happening again.

We will cover more on the topic of quality in an upcoming blog in this series.

Endnote

Although it’s tempting to sit at home and wait for things to blow over, the wise thing to do is to find ways to strengthen your company’s immune system, now. According to the World Health Organization, this pandemic is far from over. But even if things return to normal faster than anticipated, this experience can serve as a wake-up call that things can get hairy pretty quickly and unexpectedly. Manufacturers need to position themselves so as not to be caught unprepared when the next black swan comes along.

Now is the time to take advantage of the lull in activity to incorporate solutions like OptimalPlus into your operations. This is a crucial step in shielding your business from supply chain disruptions and in becoming flexible enough to prosper and grow no matter the external circumstances.

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OptimalPlus is the global leader in lifecycle analytics solutions for the automotive, semiconductors and electronics industries, serving tier-1 suppliers and OEMs.

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