Disruptions like the coronavirus are forcing companies to rethink their inventory habits
Many of us are experiencing the impact of the COVID-19 pandemic on several aspects of our lives. Personal health, relationships, work. In the supply chain space, we see more and more companies struggling to secure spare parts and components due to the disruptions caused. According to the Institute for Supply Chain Management (ISM), almost 75% of U.S. businesses have experienced supply chain disruption as a result of the COVID-19 outbreak. 57% of respondents in the ISM study said they had experienced longer lead times for orders sourced from tier-1 suppliers in China. Yet, 44% don’t have a plan to address these disruptions. Other studies, such as this recent survey by Thomas, show that companies are already looking for alternative suppliers internationally and domestically. Undeniably, COVID-19 is forcing many to rethink their approach to inventory and sourcing. But pandemics are not the only source of concern.
With growing uncertainty, diversification is a must
As Thomas rightly explains, coronavirus is not the only reason to break traditional supply chain habits. Trade disputes between the U.S. and China and most recently, between Saudi Arabia and Russia, have been profoundly disruptive. Natural disasters like earthquakes, flooding and wildfires can have grave consequences for people and businesses too. The 2011 earthquake and tsunami in Fukushima, for instance, exposed many hidden risks in supply chains. Companies had to deal with the impact not only on first-tier but also second or third-tier suppliers. Strikes and ongoing challenges like data breaches can also upend supply chains in an instant. What does this mean for manufacturers from an inventory perspective?
Digital inventory is picking up steam
Rather than relying solely on a single partner, companies are diversifying their suppliers pool. Experts are recommending robust systems to monitor suppliers. New technologies, like 3D printing, can also help. 3D printing is one of the fastest growing technologies in manufacturing. Over 70% of the world’s manufacturers are using 3D Printing in some form. Metal 3D printing, in particular, has seen about 30% growth in the past two years. McKinsey states that the use of 3D printing will reduce inventory holdings up to 75%. What this means is that you can have part designs digitized and 3D-printed as units or small series on demand, closer to the location where they are required. The first step is to digitize your inventory. Then you can embed 3D printing in your supply chain to gain the benefits of flexible logistics and on-demand production based on proximity.
If you’re wondering where to start, a service like DiManEx can help. Our end-to-end platform enables you to identify the right parts for additive manufacturing, digitize your inventory and print parts on demand through a network of industrial-quality facilities. Digitizing your spare parts inventory has many advantages. During a crisis, customers rely on us to route production orders to manufacturing facilities that are the closest to the delivery location, and thus are less prone to disruption. There are many other benefits too. For one, you no longer need to worry about demand unpredictability, as you can secure parts only when you need them. You can avoid overstocking, and significantly reduce lead times and downtimes.
How does it work in practice?
We see examples across industries and throughout the manufacturing lifecycle — from first series for product introductions to components for aging assets. Lightyear, a brilliant automotive company based in the Netherlands, worked with us to secure a first series of parts for its long-range solar car prototype. They obtained these parts a lot faster than through traditional production, saved significantly on tooling costs and were able to make changes on the fly at a much lower cost than through traditional means.
Electrolux, a leading OEM, also works with us to secure like-for-like replacements of parts. They are required by law to keep parts in stock for their appliances. To comply with these regulations, they often incur high set up costs, large minimum order quantities and eventual scrapping costs. 3D printing offers a better way, by enabling them to supply the part as needed, on-demand, without the need to stock large quantities of parts. They work with us to 3D print, test and deploy several parts on the field.
JLG, which makes and sells access equipment, also works with DiManEx to produce spare parts. For example, they needed a critical plastic part for their aerial work platforms. Without this part, the machines don’t work. JLG’s clients, equipment rental companies, needed to get a part replacement as fast as possible. However, the part was out of stock and its supplier had a lead time of four weeks. The machine rental is €450 per day, so a downtime of four weeks would cost JLG’s customers €9,000. To address this issue, JLG used DiManEx’s digital supply chain platform. The parts were secured within a week, potentially saving JLG’s customers thousands of dollars.
These are just some examples of companies who are already embedding 3D printing into their supply chain to combat disruption. For more use cases, check out the video below.
Are you ready to re-think your inventory holding to better manage risks?
To assess where you stand, start by looking at your data. Progressive organizations are systematically reviewing their supply chain to localize their supplier footprint and digitize their inventory. You’ll find that while unforeseen events like the coronavirus pandemic are indeed triggers for the adoption of this disruptive technology, there are ongoing benefits that you can gain as well. Among them, less tooling costs up front, less waste and logistics miles travelled, less CAPEX committed and significantly shorter lead times.
Watch our on-demand webinar with Logistyx, “Re-thinking Inventories to Mitigate Supply Chain Risk,” to learn more about this topic! Get the recording
