Supply chain disruption always will be with us, but the COVID-19 pandemic has aggravated previously identified issues and spawned upheavals everywhere. When crucial components of key products suddenly become unavailable or unreliable, the enterprise itself can be threatened.

The pandemic has ratcheted up many everyday business unit challenges into the C-suite. When these challenges hamper the production of goods and services on which the sustainability of the business depends, executive leadership needs to step in.

It’s about restoring lost resiliency in the supply chain. Resiliency means the organization has the information needed to respond swiftly and effectively to unanticipated shortages, missed supplier deliveries, last-minute substitutions, quality lapses and the like. With detailed forecasts and accurate information about part and component availability, companies with resilient supply chains can overcome nearly any disruption — even supplier shutdowns — and find ways to benefit from difficulties.

Any examination of supply chain information involves three imperatives:

•  Correctly reading the warning signs when suppliers are struggling, 
•  Understanding the consequences of not acting decisively, and
•  Deciding how best to restore lost resiliency 

There’s also an unrecognized truth about information that’s supposedly missing from supply chains. In nearly every case, the information is likely to be invisible — buried within data debris. In other words, the warning signs in supply chain issues are really information problems waiting to be uncovered and addressed proactively.

The information might also be available but in the wrong format for widespread and effective availability, i.e., it doesn’t provide the necessary insights on which to act. A classic situation is the part drawing that contains critical performance characteristics needed to determine whether a part can be superseded in the event of a supplier shortage. When critical information is on a computer-assisted design (CAD) drawing, or in a PDF file, it’s essentially invisible to practically everyone in the organization.

All of this leads to vexing questions: How do we know what information is missing from supply chain databases? How costly are these shortfalls? How can they be remedied? What do we need to do to be resilient amid disruption? And what exactly is the supply chain, anyway?

There are no concise answers to these questions; every supply chain has a unique set of information problems. There are, however, some recommendations that can help leadership deal with these challenges. They can be summarized as achieving supply chain resiliency with information you didn’t realize you had.

Scattered Data Debris

Business unit managers turn to C-suite executives for help when they’re unable to locate critical supply chain information and don’t understand how to deal with disruption. When such fundamental problems arise, leadership should bring together management, long-time users, and supplier representatives. A caveat: These discussions should initially avoid issues of cost, quality and delivery time, to zero in on how to find “missing” information and make sure it stays “found.” This goes to the heart of resiliency.

Management, users and suppliers should zero in on why crucial information disappears into mountains of data debris. For the most part, “missing” supply chain information is: 

•  Poorly structured or unclear,
•  Hidden away in a document,
•  In the wrong context,
•  Misdirected through data linkages, or
•  Entangled in rules about access, check-in/check-out, and data granularity. 

A related “missing” information challenge is the lack of a standard data structure or data organization, i.e., a data taxonomy or classification. To enable some data standardization, people typically resort to spreadsheets and e-mail as they struggle to resolve differences of opinion about how to structure information. The root cause of miscommunication is a lack of viable enterprise standards for classifying and structuring information across the supply chain. If the back-and-forth among users and managers seems unlikely to produce a workable classification agreement, leadership needs to step in.

Executives should insist that managers and users acquire purpose-built cross-enterprise tools for standardizing classification, taxonomy and data structure. Spreadsheets fall short; there’s too much variation in the supply chain information, and the necessary detail is too complex to be managed in rows and columns. An internally consistent classification structure can greatly enhance the supply chain information, which moves constantly among users and between databases.

Even the most tightly managed enterprises have a plethora of supply chain databases. The common ones are component libraries; supplier management and optimization systems; enterprise resource planning (ERP), where manufacturing bills of materials (MBOMS) are managed; CAD models, as well as drawings managed in product lifecycle management (PLM) applications; digital twins, and digital threads. Leadership should push management to find all these databases scattered among the business units.

Usually, one critical database is missing: the one used to manage standard classifications, critical geometry, performance capabilities and material characteristics (sometimes called attributes) about parts and components, both procured and manufactured in-house. This information must be logically presented so that everyone in the organization can see and compare information about groups of similar parts and components. When information is organized in this way, similar parts can be readily identified and substitutions easily found in response to a supply chain disruption.

Executives may be told that this critical part information is stored in their PLM’s database. That might be so, but rarely is the information organized in a way that enables resilient supply chains.

Capturing 'Component Architecture'

Information that disappears into an organization’s data debris isn’t the only problem. In most supplier databases information about component attributes is rarely current and complete. Also problematic is data on cost and delivery time.

Good sources of replacement information are your suppliers themselves, if they’re willing to offer the level of detail needed, and your organization’s own manufacturing BOMs.

One example of getting this right comes from a major home-appliance manufacturer. Several years ago, it embarked on a project to develop a “component architecture,” which would capture the performance, geometric and material characteristic for all purchased parts and components, such as motors, valves, lights, switches and electronic controls.

Initially, this information proved useful for reducing costs by finding and eliminating duplications, and determining which parts were overpriced based on their characteristics. It came as a surprise when the manufacturer discovered found price variances as large as two to one in parts with the same attributes. When these dramatic differences were discussed with suppliers, many discounts and parts consolidations followed. After two years, this program resulted in $2.6 billion in free cash flow on material costs of $8 billion.

Another home-appliance manufacturer compared standard costs of purchased items for its products to the prices on the purchase orders to suppliers, and found that over half the products had negative selling-price margins.

Leadership should insist on this level of clarity and consistency throughout the supply chain. 

A classic ERP problem is the organization’s failure to maintain critical data for ordering raw materials, parts and components. One example is total replenishment lead time (TRLT), which adds up purchase periods, time to manufacture and transit times. If these times are wrong, both shortages and inventory spikes may occur. (Just-in-time inventory management systems are especially vulnerable to supply chain disruption and information problems. In the near term, they should not be implemented or expanded.)

Manufacturing BOMs are generated in ERP to pinpoint each physical component, its quantity needed at each stage of production, and usually much more. When critical data disappears from ERP databases, it eventually manifests itself as BOM errors. These errors lead to last-minute component substitutions, rework, production shutdowns and broken delivery promises.

PLM Problem

PLM solutions aren’t immune. For one thing, PLM databases rarely have all the attributes needed for evaluation and procurement. For another, PLM’s digital threads must be linked to every relevant source and node, hence PLM’s end-to-end connectivity. Otherwise, PLM’s digital twins — virtual representations of physical products that are constantly updated by PLM’s digital threads — will be unreliable.

Both ERP and PLM can be enhanced to make supply chain information available as needed. C-suite leadership should insist that ERP and PLM enhancements begin promptly and kept in sync. A logical follow-through is requiring the use PLM architectures to help store, link and manage detailed data about purchased parts, and ensuring that these digital threads and digital twins be shared with ERP users. (Keep in mind, however, that ERP and PLM serve very different needs for the organization.)

Again, executives should regularly remind managers about the high costs of missing information in BOMs, digital threads and digital twins. ERP and PLM enhancement should be justified in terms of added workforce productivity, smoother production, shorter delivery times, better pretax profit margins and healthier bonus pools.

Once the initial disruptions are addressed, leadership should point supply chain users to the theory of constraints and lean manufacturing. Both offer sound information-management practices.

Companies face multiple consequences if supply chain database shortcomings aren’t addressed decisively — and even more benefits if they are. Long-term, the biggest gain will be the knowledge and capability to act when resiliency is once again threatened, as it surely will be.

As with tackling any far-reaching problem, leadership should demand that management verify key decisions. Benefits of acting decisively and proactively should be spelled out in terms of budgets, bonuses, and bottom lines. Finding, restructuring and understanding the supply chain information that’s buried in your systems’ data debris should ensure that resiliency will be re-established.

Dana Nickerson is an executive consultant, and Peter Bilello is president and chief operating officer, of CIMdata Inc.