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The changing paradigm of supply chains

Updated: Nov 17, 2022

Supply chains are undergoing a dramatic re-think. The previous rules that governed sourcing and investments decisions are being overturned. What were those rules?

- Make at the cheapest source of labor

- Transportation costs are insignificant

- Individual suppliers are reliable, therefore the entire supply chain is reliable

- For planning, in-transit is as reliable as in inventory

- We can ignore the environmental and societal impacts

- National security is not a factor in sourcing

How have the fundamentals changed?

- Most products are no longer labor intensive

- Transportation costs and delays are significant

- Supply chain resilience is more that the sum of the parts

- Sooner or later companies will have to publicly account for GHG

- Sourcing does have national security implications

- Just-in-case is replacing just-in-time

What are some opportunities arising from this paradigm shift?

- US policy and legislation is now highly relevant in a resilient supply chain. This introduces a new opportunity (and a new uncertainty). National policy has long ignored industrial policy vs. other developed economies.

- The visible, connected supply chain is essential

- Distributed manufacturing, using #advancedmanufacturing to produce as small, localized scale.

- Long term supplier development is a competitive advantage.

Working with suppliers to advance their capabilities is largely untapped. Best-in-class manufacturers such as Toyota have known that to continuously improve ‘my’ manufacturing I have to improve the manufacturing of my suppliers. US companies have largely left supplier improvement out of their plans. Change suppliers rather than develop suppliers. This is where lean manufacturing, Industry40, industry50, supply chain data exchange and collaborative planning and scenario planning become essential.

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