A Look at Your Supply Chain in Times of COVID-19

Despite significant efforts to contain the spread and global impact of COVID-19, the situation has worsened, affecting people and companies all around the globe. The full implications of COVID-19 on the supply chain remain difficult to predict, with some areas slowly returning to activity while others are now being adversely affected by the virus. It is, however, possible to see that, at this stage, the crisis is having a direct influence on the supply chain, from raw materials to finished products.

As a company with a strong presence on the ground, visiting factories every day, we at API have seen first-hand some of the challenges that brands and retailers are facing in their supply chain. We are helping our customers and their suppliers brace for the impact this extraordinary crisis has had, and continues to have, on their supply chain, providing them with short-term solutions that will help them maintain high quality in their processes and goods while ensuring that the people on the ground remain safe.

Supply Chain Challenges

We were confronted with the gravity of the crisis during the first peak of the virus in China, where some factories were unreachable, production stopped, goods were unable to be shipped, etc. Now that activity is resuming in this part of the world, the challenges have evolved, resulting in many companies putting the quality of their products at risk. It is important to bear in mind that these challenges will most likely be replicated in other manufacturing areas when activity resumes. Therefore, a sound understanding of those issues now might allow for quicker reactions in some of your other sourcing locations. Among them are:

• Shortage in labor/workforce: factories are struggling to get 100% of their employees back on site due to health issues or travel restrictions. This might encourage factories to hire new people lacking experience, with no time for adequate training and with the risk of undeclared subcontracting.
• Inadequate production planning and status: when resuming activities, some factories might not operate at their full capacity which will render it difficult to meet production targets. It is important to check your factory records in order to see actual people in the production line, daily output, and quality control reports.
• Rush in production: when factories are able to resume activity, some might be in a rush to make up the time they lost and may be tempted to cut corners and speed up processes. Some steps are rushed leading to mistakes, and some steps are directly skipped such in some cases the quality control, which might put your entire production at risk.
• Excessive stock: goods that were produced before the virus outbreak have likely been held in the warehouse while awaiting shipment. In warehouses where storage and conditions are not satisfactory, complications such as deterioration or the development of mold may have emerged. 

• Raw materials shortage: resumption of activity leads to an increased demand for raw materials and components, thus resulting in a shortage. Brands and retailers can shift their production to areas that are less impacted, such as other SEA countries, which involves a risk if the new suppliers and factories are not adequate. 

• Lack of quality control to ensure safety: at the height of the epidemic in China, factories and third-parties reduced the movement of people in and out the premises to avoid putting employees at risk. This meant a decrease in the level of quality control, which put the production quality at risk.

7 Tips to Help Alleviate Disruptions in the Supply Chain

This crisis may be the catalyst to revisit the global supply chain strategy and accelerate the adoption of new models and capabilities, but in the meantime short-term actions are needed to respond to the challenge.

Here are some tips from a manufacturing perspective to help with the continuity of your supply chain while maintaining quality products:

1. Care about your people and your supplier’s teams

• Educate employees on COVID-19 symptoms and prevention
• Ensure your factory has screening protocols

Training and specific audits that focus on the measures to be adopted during this crisis are a good tool to ensure the health and safety of the teams.

2. Increase your visibility on workforce/labor planning

• Check actual capacity of your factories
• Assess impact on production times
• Pay additional attention to product quality as plants run with fewer workers and some might hire temporary/new staff who might be unqualified

Data collection here is key: from gathering the records of the factories for a quick screening, to implementing more in-depth measures such as technical audits, in-line inspections or in-production assessment, having greater visibility of the real situation of your factories is vital at this stage to not only ensure the completion of your production on time but also the quality of the goods delivered.

3. Understand your key suppliers and increase the transparency of all your supply chain

• Understand the impact your orders have on one’s factory production lines
• Understand the flexibility one factory has in regard to production / purchase shifts

Whether your orders only represent a small portion of one factory’s production lines or you are flooding these same production lines with your goods makes a huge difference as to how to interact with this factory. If you are not a key customer, you need to make sure you understand how the factory will be dealing with your order when/if they face a shortage of staff or inventory. 

4. Carefully select the suppliers you’ll work with if you are shifting countries

• Ensure you’re working with the right suppliers for your productions

The concept of shifting production to other areas was already on the table before the virus appeared, with a trend among many companies toward considering moving ‘out of China’. Diversifying areas of production and looking for alternative locations can help secure additional inventory and capacity. However, launching production in a new area can be challenging if you don’t have the experience or the right teams in that specific area. A third-party company can support you with adapted solutions to facilitate the transition and ensure the quality of your production through a dedicated technician program.

5. Update inventory policy and stock management

• Before = as little stock as possible
• Now = need to anticipate and increase safety stock

This might lead to associated risks such as product deterioration or mold development which can be identified via a final inspection and tackled with a warehouse condition audit or a more elaborate mold prevention program.

6. Align IT systems and support evolving work requirements

• Manage quality remotely
• Use new IT tools and solutions

We are being forced to shift from a culture of ‘on-site’ work to ‘remote work’. Be ready to embrace change and to consider possibilities that were not even contemplated a few months ago, such as video-monitored inspections.

For brands, retailers and importers’ quality management teams, online quality management solutions can help manage your goods’ quality even when working from home. With a simple click of the mouse, it is now possible to keep track of your quality actions, read reports and make decisions on whether or not the goods should be shipped. Expert technicians are also one video/phone call away, offering their support in these difficult times and finding the best possible solutions to cope with the crisis.

7. Prepare for the rebound

• Be ready to move quickly

We are, without doubt, facing exceptional times and although it is impossible to anticipate when and how this epidemic will pass, we need to remain confident, align our efforts and prepare for a brighter future. Stay alert and ready for change: those that are able to adjust quickly will have a higher chance of rebounding and adapting to the times ahead.

At API we are putting our manufacturing experience and product expertise at the disposal of our clients to help them adjust during this difficult time. Thanks to the agility and flexibility of our teams and our local infrastructure we are able to quickly implement on-site and remote solutions to respond to our clients’ needs.

Do not hesitate to get in touch with us to discuss your supply chain challenges.