Global supply chains have once again been sent reeling, this time by the disease COVID-2019, referred to hereinafter as the Coronavirus or COVID-19. This crisis has seen major manufacturing and transportation hubs in China grind to a halt, generating ripple effects that impact all major sectors of the economy in every region of the world. The connected home ecosystem of network service providers (NSPs), technology partners, application developers and others has not been exempted.
It seems that the connected home community is now on a consistent 12- to 18-month schedule of new supply chain disruptions that threaten go-to-market plans and new technology-enabled service deployments. This year it is the Coronavirus. Last year, and still in 2020, there was uncertainty related to trade wars. Before that we had the shortage of ceramic chip capacitors, which followed the memory supply crisis that sent component prices on a sudden and dramatic upward trajectory.
Ironically, all the crises that have led to the disruption du jour have actually contributed to a better market position for the most sophisticated supply chains serving NSPs around the world. We now clearly know the principles that must be mastered to weather — and then rapidly recover — from disruptions that interrupt the orderly implementation of business plans designed to achieve financial objectives.
Build supply chains on C.A.R.T. to accelerate return to normalcy
While the time it takes for the coronavirus crisis to ultimately resolve depends on the effectiveness of global, national and local public health initiatives, the speed at which supply chains return to normalcy will depend on how well participants adhere to the principles of continuity, agility, resilience and transparency (CART).
- Continuity — Much attention has been paid to supply chain efficiency, epitomised by just-in-time manufacturing processes that call for zero-day inventory levels. While efficiency is important, the principle of “continuity” requires a commitment to some level of redundancy that may appear to add cost back into the supply chain process. However, given the demonstrated volatility of global markets — and the increasing manifestation of “Black Swan” events — many NSPs are now making investments in supply chain partners that have diversity on the back end to offer options to unanticipated interruptions in capacity. There are a growing array of new component manufacturing opportunities emerging in places like Thailand, Vietnam — and other locations around the globe — that are increasingly in a position to pick up the slack should one country or region go off-line unexpectedly.
- Agility — Having options is one thing. Being able to shift from one standard operating model to another quickly and efficiently is quite another. The ability to leverage communications and collaboration to rapidly bring up capacity in one part of the world while winding down operations in others has been greatly enhanced by new platform technologies and improved analytical and tracking tools. That said, the most important piece of the puzzle is the human factor. Having effective leaders of skilled rank-and-file personnel who can shift gears quickly across a multi-vendor supply chain is not an easy — or inexpensive — capacity to build. It is, however, an investment that pays off when crises disrupt existing operations. Agility, in this context, is a team sport. It requires players from different organisations to quickly shift game plans in a coordinated fashion.
- Resilience — Supply chains will have to develop the ability to take a punch, fall down, and get back up. This is true for every region and stage of the value chain. As one part of the system goes down, it is important to rapidly shift to alternate locations. It is also important to rebuild and restart operations at the point of crisis to maintain the array of high-quality alternatives over the long term. There is safety in numbers, as long as the number of viable options remains high.
- Transparency — There is no excuse for opacity in today’s supply chain. The inability to capture activity through several tiers of the ecosystem deprives decision makers of the raw data needed to make appropriate risk-adjusted decisions based on an accurate assessment of realities on the ground. Transparency does not guarantee that executives will like what they see. But it will provide an honest basis for understanding the current state of the situation and inform decisions that accelerate a return to operations that will put organisations back on track to achieve mission-critical objectives.
Technicolor’s response to the coronavirus crisis
Even before the Coronavirus manifested itself, Technicolor has leaned on the CART principles when responding to sudden and dramatic changes to the supply chain picture. As news of the outbreak first emerged, we immediately put together a crisis management team that was made up of players across all the critical supply chain functions — including sourcing, logistics and marketing. We launched a rigorous daily process of taking inventory of our supply chain partners to understand which facilities have been impacted, and which have not.
Because of the nature of the coronavirus, we immediately realised that travel to conduct inspections would likely be curtailed and even discontinued altogether. For this reason, we immediately established a local network of observers who were onsite to provide us with an ongoing assessment of how our partner facilities were navigating the crisis. We are in contact with these observers on a daily basis to understand what is happening on the ground at a granular level.
This has helped us share a treasure trove of information with our customers and fellow supply chain partners. While the information has not always been good news, it has provided us with a clear path for assessing options for developing work-around solutions.
We have replicated this system on the logistics side of the equation to understand the bottlenecks — as distribution centers slow or cease operations — as well as to quantify the impact on the inventory of components in transit. We talk with all key members of our extended supply chain team on a daily basis to understand their stock levels, logistics situations, and human resource constraints, as facilities open, close and then open again. Armed with this information, we are working with NSP customers and suppliers outside of the affected region to develop immediate contingency plans.
We are leveraging our most accurate assessment of the facts on the ground with our robust set of supply chain relationships around the world to advise our NSP clients on the best path forward to meeting the objectives set prior to the onset of the coronavirus.