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Every week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of an on-going series. Each article aims to share a little insight into what's going on that week, and to help foster discussion amongst industry professionals across levels, geographies, and companies.
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The pandemic has made the term resiliency a very hot topic. Resiliency in supply chain means ensuring that a company is not overly dependent on one primary source, or one primary source country. This is because in the event of a disruption, importers need options.
For example, many bicycle importers couldn't get bikes last year largely because there is one dominant bicycle parts supplier in Japan. Shimano could not keep up with the spike in demand created by the pandemic, so nearly every bike manufacturer was impacted, which in turn impacted nearly every bike importer.
If you tried to buy a bike or a grill last year, you now know why they were so hard to come by. The importers of those products did not have a resilient supply chain. Automobiles is the other well known example of this. The the largest manufacturer of chips, NTSC had similar 'demand' challenges.
In an "ideal" world, an importer would have at least one backup country, and one back up supplier for every critical product. Further, the importer would understand how dependent their suppliers are on a single source - as in the example above.
All of this sounds good on paper, however it's actually incredibly difficult in practice for two reasons.
For example, many bicycle importers couldn't get bikes last year largely because there is one dominant bicycle parts supplier in Japan. Shimano could not keep up with the spike in demand created by the pandemic, so nearly every bike manufacturer was impacted, which in turn impacted nearly every bike importer.
If you tried to buy a bike or a grill last year, you now know why they were so hard to come by. The importers of those products did not have a resilient supply chain. Automobiles is the other well known example of this. The the largest manufacturer of chips, NTSC had similar 'demand' challenges.
In an "ideal" world, an importer would have at least one backup country, and one back up supplier for every critical product. Further, the importer would understand how dependent their suppliers are on a single source - as in the example above.
All of this sounds good on paper, however it's actually incredibly difficult in practice for two reasons.
"In an 'ideal' world, an importer would have at least one backup country, and one back up supplier for every critical product... All of this sounds good on paper, however it's actually incredibly difficult in practice."
One key reason is the dominance of China. Many importers are concerned about China as a sourcing point due to increasing tensions between the countries. However, the reality is that China dominates mfg in Asia, and they are very good at it.
As a result, quitting China is hard, as you will see in the excellent analysis below by Rita Rudnik.
A second reason is much more mundane. Most importers lack a robust database of their suppliers, and their supplier's suppliers. On the surface this sounds ridiculous, however we have gone through decades of 'predictable' supply chains where this wasn't a priority. Using the example above, most of the bike importers I spoke to were simply not aware of how reliant their suppliers were on Shimano.
My guidance to all importers is to address this database issue quickly. Beyond resiliency, knowing a lot about who makes your products, and who makes their parts, is also critical for understanding things like cost, ESG, and sales.
As a result, quitting China is hard, as you will see in the excellent analysis below by Rita Rudnik.
A second reason is much more mundane. Most importers lack a robust database of their suppliers, and their supplier's suppliers. On the surface this sounds ridiculous, however we have gone through decades of 'predictable' supply chains where this wasn't a priority. Using the example above, most of the bike importers I spoke to were simply not aware of how reliant their suppliers were on Shimano.
My guidance to all importers is to address this database issue quickly. Beyond resiliency, knowing a lot about who makes your products, and who makes their parts, is also critical for understanding things like cost, ESG, and sales.
