Biden Crackdowns on Vehicle Software & Hardware from China

In the latest evidence of the heightened concerns related to geopolitical risk, Biden has cracked down on most Chinese cars and trucks with a rule that software and hardware cannot come from China. There is concern about having millions of cars on the road with a potential threat to national security. There have been discussions about similar crackdowns on Chinese drones. After the recent strange occurrences with drones, it is concerning. We have worked with a significant U.S. drone manufacturer with an innovative spirit and engineering prowess, and forward-thinking companies will source from these types of powerhouse manufacturers. The rest will risk significant disruption and decline as world events unfold.

Implications for the Supply Chain

As geopolitical and cyber risks elevate to the executive suite, proactive companies will take action. Not only are backup suppliers required to mitigate for supply chain disruptions and weather events (such as the Los Angeles fires), but backup suppliers are required to cover for geopolitical and cyber risks as well. As we discussed in our article, The Backup to the Backup, the backup cannot be in name only. Thus, you must purchase from your backup suppliers continually. You should also diversify your backup sources of supply. They shouldn’t all be in the same region, country (especially if not in a partner country, let alone a friendly country), sourcing critical minerals from the same supplier, dependent on the same critical infrastructure or networks etc. Sourcing backup suppliers is no longer easy!

Backups are no longer enough. You should formalize your relationships with your suppliers. Unfortunately, a handshake is no longer enough. Forward-thinking companies are pursuing formal partnerships, joint ventures, and vertical integration for critical manufacturing processes, materials, and partners.

As companies change, add, and delete supply chain partners to mitigate risks and maximize customer value, supply chains will evolve. As supply chains evolve, your demand and supply patterns will shift, creating potential disruptions and ripple effects throughout your end-to-end supply chain. After all, historical forecasts will be incorrect. New capabilities will have to be accounted for, and shifts in volume must be communicated and support provided if you want to successfully serve customers, increase profitability and accelerate cash flow. Although supply chains have never been simple, if all the pieces stay relatively the same within a reasonable tolerance, managers can rely on gut feel and systems can easily be automated. That is no longer the situation.

The Path Forward for a Successful Supply Chain

As supply chains evolve, your big picture and detailed tactics must change. Starting with the big picture, you must understand what’s coming down the pike from your customers and what’s evolving and/or likely to evolve in your end-to-end supply chain. It is no longer simple; you must be thinking of down-the-line impacts, changing conditions in your market or industry, critical potential roadblocks/ issues, and impacts to your demand and supply. You must be thinking about being the disruptor instead of the disrupted.

In essence, you want to look at the big trends and changing patterns for your demand and supply. This is typically best handled with a SIOP (Sales Inventory Operations Planning) process. There is no need – and no time – to get lost in details and data; instead, start by assessing the big picture and making directionally-correct decisions to stay in front of your customers’ needs and to ensure profitable growth. From a common sense point-of-view, are you going in the “right” direction? It doesn’t matter if you are efficient if you are driving in the wrong direction! To learn more on rolling out a successful process, refer to our book, SIOP: Creating Predictable Revenue and EBITDA Growth.

With that said, the big picture does nothing without a focus on the fundamentals. Said another way, plans don’t fail in formation; they fail in execution. So, what is essential to your execution? Planning, manufacturing and supply chain processes backed with the better use of ERP and the appropriate advanced technologies will drive results. For many companies, developing a simple demand planning process (view into order backlogs and customer forecasts) will drive successful operational execution. Managing your order backlog can achieve customer success while driving costs out of the business. To learn more about this process, refer to our article on effective backlog management best practices.

Beyond simple demand planning processes, your demand must be translated into manufacturing, distribution, purchasing, and materials schedules. MRP and advanced planning processes will become even more essential as basic tasks are automated yet orders must be fulfilled successfully and profitably. As conditions change, MRP will pick up purchase order, work order, and transfer order changes, and advanced planning systems will go a step further to optimize, predict and adjust to changing conditions so that your high-skilled resources can review recommendations and focus on bringing insights and expertise to the table.

As companies upgrade, automate and digitize supply chains, additional risks will be exposed. Thus, your archaic ERP system supported by “Joe in Montana” is no longer enough. You must partner with a modern ERP partner that is investing in the appropriate infrastructure, functionality, and technologies to stay in front of changing conditions and customer expectations while also remaining secure. Cloud computing is becoming the norm, backed by strong I.T. professionals and backup systems. Beyond your ERP system, you must consider your IoT devices such as camera and counters in manufacturing, forklifts and warehousing automation equipment, GPS and autonomous features in trucks, control tower features in supply chain, and data analytics/ business intelligence systems. As companies automate the repetitive, the high-skilled responsibilities grow. AI should not be left on its own to make decisions that will make or break success without proper oversight and interaction.

Although opportunities will be abundant for those that innovate and are forward-thinking, it will not be for the faint of heart. High-skilled talent is scarce, technologies are ripe with complexity and risk, and process upgrades sound far simpler than they become when the rubber meets the road. Stay abreast of changing conditions, critical risks, key trends, and what’s available so that you can take advantage of opportunities as they arise. To learn more about threats and what the best are doing, download our special report, “FutureScape: Crafting Tomorrow’s Supply Chain Today“.

If you are interested in reading more on this topic:
Planning & MRP Upgrades to Support Revenue Plans & Proactively Plan Capacity