Evaluating Supply Chain Strategies: Make vs. Buy Decisions

Over a million containers travel to Europe from China, a testament to the global interdependence in trade and manufacturing. However, recent geopolitical tensions and health crises have severely impacted these supply chains. Containers must now travel by sea due to sanctions, a direct consequence of Russia's invasion that severed key supply lines. This disruption has led to significant production cuts in Europe, particularly in the automotive sector, due to shortages in essential components such as wiring.

The Impact of Geopolitical and Health Crises

Global supply chains face unprecedented risks, teetering on the brink of a complete breakdown. The complexities of modern supply chain management, often described as 80% predictable with 20% surprises, require constant vigilance. Companies are now more focused on continual monitoring of their supply chains to mitigate these risks. Machine-learning models are increasingly used to identify potential issues and provide early warnings.

The COVID-19 pandemic's demand surge has exacerbated the current supply gridlock, highlighting vulnerabilities that were previously underestimated. In response, 93% of companies are planning to enhance the resilience of their supply chains. However, a mere 2% of these companies are aware of the risks present in their upstream supply chains, indicating a significant blind spot in their risk assessments.

China's Role and Challenges

China, a pivotal player in global manufacturing, continues to face challenges due to further shutdowns and restrictions. Recently, Shenzhen experienced a lockdown, and Shanghai implemented localized restrictions to avoid a full-scale lockdown. These measures have contributed to the ongoing disruptions in the global supply chain. The complexity of these supply chains often leads to data blind spots, making efforts to disentangle them particularly challenging.

Trade and geopolitical tensions stretch supply chains to their limits. The confluence of COVID-19, the war in Ukraine, and trade tensions between the US and China creates a 'perfect storm' that significantly impacts international trade dynamics.

Technological Integration and AI Solutions

In light of these challenges, there's a heightened focus on Maintenance, Repair, and Operations (MRO) and indirect materials management. Companies are increasingly integrating Enterprise Resource Planning (ERP), Enterprise Asset Management (EAM), and Procure-to-Pay (P2P) systems to streamline operations. Generative AI is emerging as a tool that can potentially revolutionize supply chain management by processing larger datasets and building data links between ERP platforms.

This technological integration provides procurement teams with actionable, data-driven insights, improving clarity on lead times and costs. AI applications aid in procurement and regulatory compliance, streamline production workflows, and reduce errors by cleansing 'dirty' and incomplete data. These solutions offer a single source of truth, enhancing data reliability and standardizing procurement data.

Addressing Data and Inventory Challenges

Poor MRO data is a common issue that leads to inventory discrepancies. AI applications are being utilized to confirm inventories and identify duplicate entries, thus improving the accuracy of supply chain data. The increased clarity and visibility of MRO materials help companies better manage their inventories and reduce the risk of costly shortages or overstock situations.

The integration of purpose-built solutions provides a standardized approach to procurement data, reducing the chances of errors and discrepancies. This not only enhances the efficiency of supply chain operations but also ensures a more reliable flow of materials and components necessary for production.

"The ongoing disruptions in the global supply chain demonstrate the urgent need for companies to rethink their supply chain strategies, focusing on resilience and adaptability in the face of unpredictable challenges."