Freak natural disasters damaging major industrial centers all over the globe. Civil unrest in countries with major manufacturing hubs. Even a global pandemic crippling global manufacturing.
These scenarios may seem unlikely for your supply chain, but they're indeed impacting companies just like yours every single day.
If you're outsourcing your manufacturing, it's a simple fact that you're at a much higher risk of supply chain interruption. Disruptions to your supply chain often mean:
- Longer lead times
- Increased production costs
- Reduced manufacturing capacity
Working with an American manufacturer mitigates many of these risks and ensures your production remains up and running.
Supply Chain Risks and Your Bottom Line
Supply chain risks can have big impacts on your bottom line.
According to a 2018 study by the Business Continuity Institute, the majority of companies hit by a supply chain interruption lost between $50,000 to millions of dollars in revenue. Those same companies also saw their reputation damaged.
Even worse -- the study found 30% of companies that experienced a supply chain disruption didn’t even bother to investigate the source. This attitude toward supply chain management increases the chances of the same disruption and its negative effects happening again.
How American Manufacturing Mitigates Supply Chain Risk
American manufacturing isn't a cure all-- every supply chain has inherent risks. However, working with an American manufacturer can decrease -- or eliminate -- many risks present in international supply chains.
What risks of a global supply chain does American manufacturing mitigate?
- Sluggish response to market trends and customer demand.
- Extreme delays caused by transit, supplier, or quality issues that are aggravated by long shipping and lead times.
- Inventory management problems that cause delays, obsolescence, or waste.
- Lack of legal and government support for physical theft, intellectual property theft, or cybersecurity issues.
- Government & economic instability in foreign nations.
- Overseas real estate and energy costs.
- Lack of insurance for all aspects of production.
Preparing for Supply Chain Disruptions
There’s no way to completely eliminate all supply chain risks -- it’s just the nature of the beast. However, there are a few steps you can take to protect your company and limit disruptions to your supply chain.
- Create a plan to prevent or manage common supply chain interruptions. Consider this a playbook of sorts -- the "In case of [problem], take [these steps]." Should an issue arise, there won’t be a mad scramble to figure out what your next move is. Production resumes faster, allowing your company to get back to business as usual. Remember: Failing to plan is planning to fail.
- Expect unanticipated supply chain disruptions. The unexpected happens at any time -- that’s why it’s called “the unexpected.” Don't expect everything to go smoothly all the time, and keep a cool head when you face interruptions.
3. Implement supply chain preservation measures. Acquiring insurance, consolidating loose ends, inspecting your supplier's facilities and becoming familiar with their risk management practices all bode well for keeping your supply chain running like a well-oiled machine.4. Diversify your metal manufacturing suppliers, or find a more stable single-source supplier Working with just one unreliable vendor practically guarantees that if something goes wrong, your production is down for the count. With a stable of different suppliers, or one really good supplier, your manufacturing operations are not hit as hard should something go wrong.
5. Periodically conduct risk assessments. Every so often, it’s a good idea to review potential risks that could adversely affect your supply chain. You might identify a new issue that could hamper production and can make adjustments before something happens.
Managing Supply Chain Risks Through Onshoring and Reshoring
While reducing the global elements of your supply chain does not completely free you of supply chain disruptions, it certainly helps. Not only does reshoring or onshoring components of your supply chain mitigate many unpredictable interruptions, but you'll also find yourself reaping the inherent benefits of American manufacturing.
To learn more about the pros and cons of reshoring, click on the graphic below:
(Editor’s note: This article was originally posted in July 2016 and was recently updated.)