The Coronavirus pandemic has resulted in lockdowns of enormous portions of the global population and its businesses. The unprecedented disruption in these Supply Chains and the economy, along with panic buying (eg. toilet paper) and extraordinary demand for PPE (Personal Protect Equipment) has brought the subject of a Parallel Supply Chain to the forefront.
Simply a Parallel Supply Chain is a duplication of your mainstream Supply Chain. It sounds beneficial on the surface as a way to repatriate global Supply Chains, but is it a realistic long term strategy?
Or is a Parallel Supply Chain really a journey into the Twilight Zone?
Parallel Supply Chains
A Parallel Supply Chain is literally that. A complete duplication of your current Supply Chain.
Every source of materials and components, every manufacturing facility, every warehouse and distribution channel, and every logistics mechanism is duplicated.
In concept the Parallel Supply Chain could be in ongoing operation along with your main Supply Chain. For instance maybe 10-20% of your business runs through the Parallel Supply Chain during normal circumstances with the majority going through your mainstream Supply Chain.
When circumstances require, for instance due to some disaster (or pandemic), you can turn up the supply allocation to either Supply Chain as the situation necessitates.
The theory is that a Parallel Supply Chain would minimize any future supply disruptions. Increased robustness and resilience would protect against any impacts.
But is that really the case? While everyone wants to ensure strategies are in place to prevent future disruptions does a Parallel Supply Chain approach make sense or are there better alternatives?
Parallel Supply Chain Advantages
If you truly have a duplicate Supply Chain in operation you do have a level of established redundancy which should lower your risk of supply disruption. It is not foolproof but it is a strong hedge against future problems.
This is particularly true if your Parallel Supply Chain is always running, even with a smaller portion of your business then your main Supply Chain. With appropriate planning to ensure your Parallel Supply Chain can expand capacity within a very short time frame you can crank up their output on extremely short notice.
If done correctly your Parallel Supply Chain can theoretically light a competitive fire under your main Supply Chain participants. Knowing that some other competitor can do the same work it should keep their terms, service and pricing more competitive.
Advanced investments in equipment, tooling, technology and resources provides latent capacity that is available on demand.
Because of the sweeping nature of the pandemic many have interpreted the need for Parallel Supply Chains to mean that there should be more domestic sourcing within one’s own country. For those with this view having their Supply Chains closer to home provides a level of comfort as they have less, or no, dependency on other countries.
You also have to believe that as we have progressed through the pandemic Government leaders and Board members everywhere are asking their Supply Chain teams to deploy these types of mitigation strategies.
At a high level and to the uninformed it seems like a sound approach. But Supply Chain professionals know that there are severe implications of such a strategy and ramifications that those same Government leaders, Board members, and C-Level Executives may find unpalatable.
Parallel Supply Chain Disadvantages and Twilight Zone Implications
To establish, manage and maintain a Supply Chain takes a lot of resource.
Finding, qualifying, negotiating and tracking suppliers, materials and service providers is a full time job in any organization. Supply and Demand Planning, Inventory Management, Quality Management, Logistics Management, Channel Management, Distribution, and Manufacturing must all be performed for every aspect of the Supply Chain.
This is the first challenge of a fully Parallel Supply Chain. While you may want to have duplicate suppliers, distributors and manufacturers chances are you cannot afford to double the size of your staff to deal with an entirely parallel Supply Chain. While there are some economies of scale it can be a big investment in resource to run a Parallel Supply Chain.
For many their Supply Chain is built on intellectual property and sole sourcing. Unique materials, processes, and components are what provides a competitive advantage in the products that a company brings to market. The costs of duplicating tooling and diversifying access to intellectual property can be highly expensive.
A significant misconception with the push to deploy Parallel Supply Chains is that bringing that work back into one’s home country will solve the problem. As we’ve seen with the pandemic its reach is both non discriminatory and unforgiving. There is no improved guarantee that by bringing work into one’s own country there is divine protection from future disruption.
In fact it makes more sense to establish a Supply Chain with as much diversity as possible in geographic positioning to provide as many future options as possible. Your country is not immune from future disasters. Patriotism and parochial insourcing rhetoric are poor reasons to develop domestic, Parallel Supply Chains.
There is also some commentary that a Parallel Supply Chain, if established domestically, should result in a faster, more responsive Supply Chain. This may be true as long as your domestic Supply Chain continues to run during a disaster. Otherwise it is just as vulnerable as any other.
However you look at it there is always the issue of cost. While your leaders may be pressing you to establish more redundancy in the Supply Chain they are not likely to give you any forgiveness on expenses. It can be very expensive to run a duplicate Supply Chain.
The concept of creating redundancy and contingency in your Supply Chain makes a lot of sense. It reduces risk and preserves a greater chance of ongoing continuity of supply. But is a completely duplicate Parallel Supply Chain the answer or is there some kind of hybrid solution?
We believe that you should have a dual sourcing strategy throughout your Supply Chain. Even if you don’t actively use it advanced identification and qualification of alternate sources of goods and services will put you miles ahead if a disaster strikes.
You should also consider outsourcing for many aspects of your operation. Outsourcing should not only include manufacturing, distribution and logistics but services as well. For instance there are many companies that offer Procurement or Supply Chain Management services for hire, what we like to call Supply Chain as a Service (SCaaS). By outsourcing services as well you protect your organization if it is directly impacted by any disastrous event. We believe this will be a part of the New Normal in Supply Chain.
Strategic inventory management should also be given great consideration. With diligent management to ensure the inventory doesn’t go stale, it can be most rewarding to have key materials or products in a Strategic stockpile. While common commodities can be more readily found your mission critical materials and products will be harder to come by in any circumstance so having contingency inventory on hand will help you through many situations.
You don’t have to duplicate your entire Supply Chain but having aspects of a Parallel Supply Chain in place should clearly help you survive the next disaster.