A Supply Chain In Transition

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IAA spoke with Ng Kee Wee, VP, supply chain management, electronics manufacturing services, Jabil to discuss supply chain resilience and changes post-Covid.

Ng Kee Wee, VP, supply chain management, electronics manufacturing services, Jabil
Ng Kee Wee, VP, supply chain management, electronics manufacturing services, Jabil

Q: What are the pain points, opportunities and solutions across the end-to-end supply chain customer journey and how can they be identified?

Ng Kee Wee (NKW): Constant disruptions such as component shortages, rising labour costs and geopolitical tensions will continue to upend the supply chain. With more than 100 sites strategically located worldwide, Jabil is well positioned to navigate and implement safe and practical solutions that best serve customers’ needs by offering various options, with the commonality of IT systems embedded throughout a seamless network of factories around the globe.

Concerning the healthcare industry, there has been a tremendous increase in product demand. Due to its direct impact on people’s lives and stringent regulatory environment, manufacturing healthcare products have been generally slower compared to other products. As the pandemic surfaced, Jabil received requests from numerous companies and also governments to rapidly scale production of ventilator and diagnostic equipment production. Jabil underwent a twenty fold rise in manufacturing ventilators, from 2,000 to 40,000 per annum.

Supply chains are shaped by such conditions as they evolve to manage arising and unexpected risks. Our ability to respond with such velocity is not by chance but through our continued focus on supply chain viability, risk assessment and management, supplier relationships and our dedication to improve customer experience.

The turning point lies less in how a sector reacts but more on how risks are managed within the supply chain.

Q: How can significant inefficiencies in physical events such as the grounding of the Ever Given, documentation and financial information flows across the value chain be resolved and not lead to considerable cost and asset underutilisation?

NKW: A focus on risk management is necessary in designing a supply chain. Diversity of supplies and strategies around multiple sourcing, inventory management, diversification of manufacturing locations and a global or regional supply chain design are able to thwart the negative effects of such incidents.

As companies seek to increasingly shorten paths to product commercialisation at reduced costs and risks, supply chains will need to continuously innovate and transform to stay ahead of the curve.

An evolution from a participant in the early stages of product development to embarking on a role as a co-pilot to innovate alongside customers is the modal shift to provide more accurate responses to constantly changing consumer and market trends.

Jabil is committed to supporting customers in the midst of these challenging circumstances through strategic supply chain optimisation and manufacturing operations management. In relation to the 2011 tsunami in Japan, approximately three to four weeks was taken to assess the impact of the calamity to the supply chain.

A clear visibility across customers’ entire supply chain ecosystem exists, where every facet — from raw material sources to end-customer locations — is examined, modeled and analysed, illuminating detailed views of sourcing options, production strategies and cost saving opportunities.

Customers and suppliers would receive an e-mail alert on the event which impacts them within an hour. Within forty eight hours, an internal assessment of the impact will be provided to suppliers, along with the creation of a mitigation plan.

A new paradigm of distinction such as supply chain excellence, technology expertise, cross-functional skill sets, strategic capabilities and access to a wide ecosystem of solution providers is key in reducing the undesirable effects of such incidents.

Q: Are supply chains going to become more localised or regionalised? As opposed to “global” supply chains that existed in the old normal?

NKW: Jabil manages more than 700,000 active parts for our customers and generates US$15 billion annually. Pre-Covid-19, the supply chain in the manufacturing industry comprised a good mix of local, regional and global strategies.

A post-Covid-19 world leaning towards a more localised or regionalised supply chain would depend on various factors. Companies would have to make rational decisions on where to locate their factories. Accessibility to interconnected transport links, a strong labour supply foundation, sound business and financial infrastructure, geo-political stability and favourable government policies are factors that would continue to influence such decisions.

The pandemic has reinforced a fact that supply chain professionals are fervently aware of, that the shorter the supply chain, the more responsive it is. The reason that China is persistently a major player in this aspect is in its electronic components, modules and sub-assembly industries.

The eco-system that was developed, in terms of both Foreign Direct Investment (FDI) and indigenous start-ups over the decades, has created a robust, vibrant and highly efficient supply base.

In this context, suppliers in China are the beneficiaries of a short and responsive regional or local supply chain. Conversely, the global supply chain is at play for businesses outside China in procuring these products. The complex nature of the electronics supply chain entirely depends on the number of layers and how deep you intend to delve into.

There is definitely a greater push for businesses to reconsider local, regional or global trade-offs. As a response to Covid-19, one strategy that has been formulated is the rise in adopting a local and regional dual sourcing approach toggling between local and regional suppliers, to increase flexibility and reactiveness.

Q: Has Covid-19 accelerated the move towards a more diverse sourcing strategy?

NKW: Covid-19 is not the only disruption that the manufacturing world has experienced. The Japanese tsunami and Thailand floods in 2011, multilayer ceramic capacitor (MLCC) shortages in 2018, protests and strikes are other examples.

There have been constant adaptations to the sourcing strategies over the years as supply chains globally adjust to the changing macro environment and customers’ needs. Unfortunately, the massive disruption caused by Covid-19 has cast a spotlight on the robustness of the supply chain. Assumptions made in a pre-Covid world need a re-evaluation today, with practitioners contemplating the pros and cons of:

  1. Global versus regional supply chain hubs
  2. Sourcing decisions – cost versus risk trade-offs
  3. Economies of scale via purposed built equipment, mega factories and a localised captive supply network
  4. Regular monitoring of suppliers’ impact

Not all supply chains operate identically. Due diligence and enterprise requirements in different industries result in the conception of different processes and standards. Suppliers’ requirements for providing components to customers in regulated industries is entirely different from that of consumer products.

The impact on product qualifications, reliability and supplier management cannot be underestimated. Jabil emphasises on the supply chain risk management and diversity of supplies to customers.

Q: The last mile has historically been a challenge in a region such as Southeast Asia. How can digitalisation help alleviate some of these regional impediments?

NKW: The broad definition of the ‘last mile’ challenge refers to the most efficient way of getting products to the right location at the right time. At Jabil, last-mile challenges also include upstream processes such as product development, component sourcing, procurement, etc.

The biggest pain points for customers are often the lack of visibility, untimely deliveries and costs. Taking into account some of the lessons from our journey, leveraging digitalisation to create an intelligent digital supply chain and procurement analytics platforms provide tremendous insights in offering category expertise, assurances of supply, driving real-time scenario planning and risk mitigation to stabilise and maintain customers’ business continuity.

Subject matter experts and tools that enable the proactive review and optimisation of component life cycles by identifying long lead-times, escalated components, approved manufacturer list (AML) optimisation, bill of materials (BOM) grading, supplier selection and product quality issues are also required to help ensure sustainability.

Leveraging technology to create actionable analytics to facilitate swifter responses to supply chain disruptions and a focus on reducing inherent risks that are equipped in products manufactured would also help alleviate such challenges.

This paves the way for last mile logistics to improve visibility by formulating solutions through the integration of technology and analytics. For example, Global Positioning System (GPS) tracking software that provides visibility on delivery status, updates on arrival times and forewarn delays are commonly available today.

Leveraging such data to create optimised route planning, moving away from simple distance-based to efficiency-based delivery charges can create a win-win situation for customers and companies.

Analysing data collected from complex routing or routing with high incident rates of delay will create opportunities for companies to provide greater pricing transparency and plans to improve customer satisfaction.

Digitalisation can offer an end-to-end view to streamline processes and provide full visibility beyond the four walls of a warehouse. This enhanced visibility allows enterprises to conceive better solutions that propel efficiency even when deploying last-minute changes in plans.

An example is leveraging data analytics to augment efficiencies in internal operations. This ranges from improved manpower planning to reinforced inventory strategies for consumables to truly maximise the constraints of planned capacities and routes.

Supply chain professionals who were previously sitting on the fence would now feel the urgent need to accelerate the advancement to digitise and automate their supply chain systems in navigating the new normal. Companies that are more prepared will thrive and prosper in a post Covid-19 world compared to lesser prepared competitors.

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