COVID-19 has revealed supply-chain vulnerabilities that many housing associations didn’t realise they had. As a result, building flexibility and resilience in operations has gone from being one priority among many to business-critical.
In this context, organisations need a new approach to manage supply-chain risk and build resiliency.
In Breakfast Briefing #15, John Woodruffe, partner at Cube Thinking, shares his thoughts on how the housing sector can keep its supply chain afloat when disaster strikes.
A (dis)connected world
Global sourcing may have its uses during times of stability, but during times of crisis it can wreak untold havoc.
An organisation that’s dependent on a central procurement base, for example, will find itself in a world of hurt when something like COVID-19 hits. The lack of supply – or even the lack of a reliable supply – means local alternatives will need to be sought. And that isn’t easy to do at a moment’s notice.
A global supply chain also means organisations will have to stock up. As John says, that “slow-boat from China” may take a number of weeks to deliver its product, which leads to organisations stockpiling large amounts of product in even larger warehouses. There is going to be a shelf-life on much of the stock, too, so some may not even get used.
“Don’t be drawn into thinking cheap or high volume is good”
Then there’s the issue of quality. At the onset of the pandemic, for example, large quantities of high-quality PPE were held back by Chinese authorities, and the NHS turned instead to procuring high volumes of cheap PPE from Turkey. The stock arrived without trouble, but when it failed safety tests it was rendered all but useless. And it goes without saying that this issue of procuring PPE isn’t limited to just the NHS…
The lesson, says John, is to look at a wider supply chain. “Don’t be drawn into thinking cheap or high volume is going to be good.”
Bringing it home
There can be a big upside to bringing back work to the UK and sourcing products locally (including from the EU). And as the pandemic has proved, local supply chains are a lot more resilient than previously thought.
Benefits of local sourcing include:
- More frequent deliveries
- Smaller batch sizes
- More variety (not limited to high volumes of product)
But as John says, such benefits can only be realised if you work with the local supply chains and not against them. This means being cognisant of the different tiers of the supply chain and communicating with individual suppliers. Do they have a robust supply chain? Do they have resilience plans in place? Are they themselves reliant on one common supplier? These are questions you may want to ask.
As David Lister, Golden Marzipan’s resilience expert, pointed out these questions can be asked as part of the process of testing your Business Continuity plans and in turn, testing the plans of your suppliers. Where there is a potential risk that a supplier cannot maintain the continuous supply of goods or services you should develop contingency plans as appropriate. This can include local alternatives or substitutes with a recognition of timescales to recovery.
If an item is especially important to your operation, you might want to consider holding onto some stock yourselves. Arguments can be made both for and against this particular contingency, and on which side you fall will likely depend on the nature of the item, perceived material risks, and the resilience of your supply chain.
Sharing the load
What if something like COVID-19 happens again? What if there is a phase two or a phase three? As a sector, you have to be ready.
Consider a best-of-both-worlds approach, a ratio of 80:20 for example. Some from afar; some from nearby.
“Maybe you’re looking at manufacturers from the UK,” says John. “If you’re looking at high volumes and it’s expensive product, then why not work with the supply chains and communicate with the supply chain?”
Computer says: Here’s your problem
John is currently working with a well-known housebuilder who is having issues with their supply chain. John says the issues are largely quality related, and they persist due to a lack of data analysis.
“If we can start analysing as far as on the digital side, on data, then all of a sudden we can see what the root causes [root cause analysis] are, what the major problems are,” he says.
“We can start eliminating 20% of issues and resolving 80% of the problems.”
Through data analysis, for example, you may find there is something wrong with a particular building material. Or there could be issues related to human error, such as someone repeatedly typing in the wrong specifications for a particular product. Whatever the problem is, data analysis can help you find it.
Supply-chain vulnerabilities typically arise in one of five areas:
- Planning and supplier networks
- Transportation and logistics systems
- Financial resiliency
- Product complexity
- Organisational maturity
John says the housebuilder is also experiencing problems as a result of different areas of the supply chain using different digital systems. Now, these systems don’t necessarily have to be the same, but they must be able to communicate with one another if the supply chain is to run efficiently and effectively.
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