Well, it happened. The maths just changed. The constants that we use to calculate supply chains risks have been called into question.
Supply chain nerds call this global shutdown a “black swan event” – a freak occurrence that no one expects, with dramatic consequences.
From now on, nobody can say that the chances of something like this happening are zero. We’ll all be thinking about it when planning how to make and ship products going forward.
How do we safeguard against disruptions in deliveries of components or finished goods?
One expert I heard from told me that most companies are pretty horrible at planning robust supply chains to begin with. To him, establishing any measures at all would be a good start.
With low-end products, if you had to choose two options on how to develop it from a list that included ‘good, cheap or quick’, you’d pick ‘cheap’, twice
I can vouch for that, having worked in multiple industries. If a company sells an ‘economy product line’ (internally called the ‘POS line’), then there’s a good chance that the company is not engaging in the high cost of back-up vendor validation.
With low-end products, if you had to choose two options on how to develop it from a list that included ‘good, cheap or quick’, you’d pick ‘cheap’, twice.
It’s possible that the economics of super cheap products still can’t justify building a supply chain by the book.
Perhaps now, though, mid-grade and premium products have a stronger case for the minimum pre-COVID supply chain insurance.
On the other end of the supply chains spectrum, when talking to those who haven’t worked in physical product development, I hear: “Let’s make everything 100% domestically!” They usually don’t understand the intricacies of manufacturing a finished good.
However, if you’re reading this, you probably do. If every product’s components were sourced exclusively within the UK, or any country in the Western world, many products would quickly become too expensive to sell. Plus, it’s difficult to compete with China’s manufacturing capacity and expertise.
My former American boss used to say, “If you gathered all the American experts in injection molding into one place, you’d need a large conference room. If you gathered all the injection molding experts in China into one place, you’d need a football stadium.”
Cost of validation
Leaving aside manufacturing location, the cost of simply validating two vendors can be considerable.
This is especially apparent in the world of optics, where I work. Here, custom parts like lenses or reflectors need to be manufactured with extreme accuracy.
If a part is made with a slight deviation, the end system will not work. The trial and error involved in getting one factory to make your part well can be long and expensive.
If you want to bring two unaffiliated companies up to speed on making a thing, the impact on profit – and on an engineer’s sanity – can be prohibitively high.
But what if the back-up vendor was affiliated with your main vendor? What if, just as we have sister cities, there were sister companies, too?
What if critical components of a product were made both domestically and internationally by independent, but loosely partnered companies?
A large percentage could be made, say, in China, where production is more cost-effective, and a small percentage could be made domestically, as an insurance policy.
If there were a disaster and the main, foreign factory were shut down, the domestic factory could then ramp up production.
Get your ratios right
The idea of splitting component production between two factories in something like an 80:20 ratio is nothing new.
However, a semi-formal relationship between the competing vendors is unconventional, and it could make a second design validation much easier.
Factories are like people; they have unique vulnerabilities and tendencies to make certain mistakes that you learn to watch out for.
So, if two companies get accustomed to handing off designs to each other, the entire process could be made smoother.
If the foreign vendor offered this domestic partnership as part of a package, they may be more attractive to clients in this new economic environment.
If we now look to generic parts like screws, O-rings, glues and so on, these can be easily sourced from multiple vendors.
However, sometimes even parts like these are customised to minimise overall product size. If you’ve ever ripped apart an iPhone, you already know that.
Therefore, another change going forward may be to give higher priority to building a product with standard sizes of parts.
On a happy note, it’s been exciting to watch 3D manufacturing heroes around the world snap into action to fill voids. One of them publicly announced: “This is our time to shine!” Consortiums spontaneously formed between rapid prototyping and manufacturing pros and healthcare experts.
A flood of open-source, 3D-printable designs for things like personal protection equipment (PPE), masks and nasal swabs became available, seemingly overnight.
If nothing else, developers who had a 3D printer on their wish list and were previously denied by upper management might now be able to make a convincing case.
What about your plans? Will the current crisis change your supply chains and how you develop and manufacture products going forward?
Get in touch: Erin M McDermott is Director of Optical Engineering at Spire Starter and a digital nomad (read: vagrant).
She travels the world, meeting hardware engineers who don’t know that things using light (cameras, LED illumination, LiDAR, laser processes etc) need competent design, optimisation and tolerancing, just like the rest of their widget.