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In these unprecedented times, manufacturers and their supply chains are facing many challenges. We were reminded in recent weeks that supply chain disruptions can come out of the blue, when the giant freighter “Ever Given” got wedged in the Suez Canal for almost a week, blocking a critical trade route and halting the movement of goods. Its impact on global supply chain is still evolving. The “Ever Given” incident only compounds the massive supply chain disruption over the past year brought on by the global COVID 19 pandemic. What can manufacturers learn from these disruptions? Can your business gain a clearer understanding of your supply chain challenges so you’re better prepared for the inevitable disruptions of the future?

Gilmore Jasion Mahler, LTD (GJM) brought together a virtual panel discussion to help manufacturing businesses identify opportunities for supply chain improvement. The March 11 webinar, moderated by GJM’s Wes Beham, featured guest panelists David Cohn and Bart Huthwaite from RSM Supply Chain Services. GJM is a member of the RSM US Alliance. Also featured on the panel, with the private industry perspective: Andrew Risner, Director of Procurement and Global Supply Chain Management for Findlay-based manufacturer Rowmark.  

A Bright Note to Start

In spite of all the challenges facing manufacturers, there is reason for optimism. A survey done of attendees prior to the GJM roundtable webinar found that 74% of those surveyed were somewhat or very optimistic about the future. Survey respondents said their greatest concern over the next year is building their workforce. Their second greatest concern: uncertainty in demand and supply shortages.

Rowmark’s Andy Risner says 2020 was a challenging year as they responded to the pandemic. He says the company was already reexamining its footprint before COVID-19 to better align with customer locations. As a global distributor, he says efficient movement of goods is certainly one of Rowmark’s top priorities.

“Shipping costs increase each year and service levels are important,” he says. “So, you take that coupled with the Amazon affect; you know, people want it, and they want it in two days, and they don’t want it to come in three different shipments… We don’t want to pay for split ship, so, shipping costs are a very big part of our business and we really spent the last two years trying to get our arms around it.”  

Understand the Nature of Supply Chain Disruptions

RSM’s David Cohn says disruptions in supply chains happen on an average of 3.7 years, resulting in an average of 42% profit of its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the course of ten years. Unfortunately, these disruptions are expected to become more frequent as globalized chains become more tightly linked, as well as other reasons, such as climate change.

Know the Five Enterprise Risk Categories

• Operational Risks. This risk category includes the ability to forecast supply disruptions, labor competition and availability, and the uncertainty of demand by the consumer.
• Financial Risks. This risk factor includes supplier costs, currency fluctuations, and even dealing with fraud. 
• Strategic Risks. This category of risk involves the impact of competitors and the perception of vulnerabilities, and the adaptability of business models.
• Regulatory Risks. Mitigating these risks means planning around taxation and other similar factors.
• Unforeseeable Risks. These risks include natural disasters such as earthquakes or tornadoes, socioeconomic risks, and even war. You can add stuck barges to that list now, too.

Prioritize Value Chain Preparedness

RSM’s Bart Huthwaite says you need to be as efficient and effective as you can, while ready to react and adapt to outside forces. He says prioritizing preparedness includes these steps:

• Analyze. Be sure to analyze the flow and efficiency of the supply chain.

• Anticipate. Preparedness means being able to anticipate what parts of the chain are most vulnerable. It is highly recommended you use predictive analytics.
• Plan. Be prepared to restructure the company. It is also important to note the balance needed between efficiency and risk. A costly mistake many companies make is not considering risk in the name of efficiency.
• Execute. The final step is to execute well thought out plans. Know how much the changes will cost and the way it improves productivity.

Learn from Industry Leaders

Industry leader David Cohn of Supply Chain Services says that improving supply chain stability includes organizational alignment, or “Trying to get the right hand of the company to talk more effectively with the left hand of the company… This means all links of the chain must work together, cross functionally to align supply with demand.” This can look like anything from major company restructuring to monthly meetings.

What else should you examine to prepare for the future? Here’s what the RSM Supply Chain Services team says supply chain experts are doing to help protect businesses:

• Network rationalization: evaluate/optimize your distribution centers
• Demand Planning/Forecasting
• Supply planning
• Sourcing strategy: should you look more regional, with less reliance on Asia, for example?
• Operational visibility: a clearer view of your inventory, capacity. Possible technology adoption to streamline these efforts
• Inventory management: focus on the critical SKUs so you have capacity to meet demand
• Supplier relationship management
• Supplier/third party risk management
• Advanced analytics
• Simulation-scenario planning
• “Control tower” (get a high-level view/insight into your entire supply chain)  

Our experts say that building a strategy for your business around supply chain management, with these principles as a framework, will better prepare your company for the disruptions of tomorrow.

If you have any questions or concerns, please reach out to your GJM team or contact us via our website for assistance.  

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

RSM US Alliance (www.rsmus.com/alliance) is a premier affiliation of independent accounting and consulting firms in the United States, with more than 75 members in over 38 states, the Cayman Islands and Puerto Rico. RSM US Alliance provides its members with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market, with more than 9,000 people in 86 offices nationwide. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. For more information, call toll free 800.537.7178 or visit rsmus.com/alliance.