Bill Currence, President and Managing Partner of Cornerstone Consulting Organization, discusses factors that are both independent and under the control of manufacturers suffering from the current supply chain crisis.

Manufacturers around the world are affected by a shortage of semiconductors to be incorporated into high-tech products. Could they have avoided this state of affairs? Currence says many of the factors that created the crisis are beyond their control. Even companies with the best protocols have been taken by surprise by a global event.

Nonetheless, he says, some policies that were well under manufacturers’ control exacerbated the situation – most notably just-in-time production strategies that left companies without adequate buffer stock when factories closed due to COVID-19. “Some industries need inventory to protect themselves,” he says.

The fallout from the current crisis will likely include a distancing from what Currence calls “Lean fanaticism.” The lesson is the danger of “pushing the Lean and JIT inventory too far”. Also, expect greater sourcing localization, with some of the production flowing back from China to Mexico, Canada, and even the United States. In the years to come, the diversification of suppliers will be essential.

You’d expect a near-offshoring or relocation strategy to come at additional costs, but Currence says the difference between that and production in Asia is not as big as companies might assume. Highly industrialized countries offer the possibility of adopting automation as a means of reducing production costs.

At the same time, manufacturers must accept the need to increase the wages of human workers and pass these increases on to consumers in the form of higher prices. Tools to mitigate the impact of future disruptions are available, Currence says. “It’s just having the leadership and the courage to do these things.”