If the Pandemic crippled the global supply chain, the war in Ukraine knocked it to its knees. The greatest supply chain challenge today is a prolonged Ukraine-Russia war. Beyond uncertainty, it creates barriers in the market, disrupting the movement of commodities like auto parts, oil, and grain. Moreover, this profound impact on our supply chains comes with attendant near weekly price increases, fueling the fires of inflation. As a result, most businesses and millions of consumers worldwide are feeling economic pain.
Supply Chain and the War
A recent Dun & Bradstreet report, “Global Business Impacts: Russia-Ukraine Crisis,” cites that nearly more than 600,000 businesses worldwide rely on Russian and Ukraine suppliers, with just over 90% based in the US. Those high numbers are partly due to the oil, gas, wheat, corn, sunflower seed, semi-finished iron products, and other staples of American life exported from Russia and Ukraine. So finding new avenues for these products has seemingly overnight become an urgent discussion.
Economic Fallout in Ukraine and Russia
Russia’s invasion has shocked Ukraine’s economic landscape. The World Bank reports that Ukraine’s economy will shrink by 45% this year. It could drop even lower depending on the severity and length of the war. Russia’s economy has also sunk into a deep recession; output looks to shrink by 11-12% this year.
With supplies limited, manufacturers have left Ukraine, and those still in business are dwindling in number. Ben Findlay, CEO of UK-based Machine Compare, a digital marketplace that sells used machinery to help reduce waste across supply chains, spoke on a recent Verusen webinar. Many of Ben’s customers and partners in Ukraine have left the country due to the shattering impact on goods, services, and the effect on businesses, along with the expansive human tragedy.
Managing the Challenges
What can supply chain managers do? Higher prices for critical supplies are bound to continue.
One of the ways supply chain and operations managers in production facilities can better manage these challenges is to optimize materials management, starting with their maintenance, repair, and operating (MRO) supplies.
Without a good strategy for MRO, manufacturers may be in the dark on holdings across their enterprise network. In addition, poorly managed processes could lead to unnecessarily high costs, excessive downtime and poor operational performance, duplicate parts, higher than needed inventory for some items while shorting others, and increasing risk overall.
Companies that keep too much inventory on hand may be wasting money they don’t have. But being out of stock on products can lead to plant downtime or shutdowns. And the work to get back up and running becomes very costly and time-consuming.
When companies make MRO materials management a top priority, they are more likely to control their inventory and other supply chain processes, increasing agility and improving revenue and margins. Ensuring correct maintenance and repair parts on hand is also crucial to keeping plants running smoothly and supporting employee satisfaction.
One example noted by The Wall Street Journal found that companies have routinely worked with multiple suppliers for goods and parts in years past. But more recently, companies have been seeking a higher standard of product quality across the board.
Working with various suppliers could lead to varying degrees of product quality. So more companies are now building their factories and managing the MRO and supply ecosystem themselves to be as productive and quality-driven as possible.
Gear up for MRO Materials Management
With inflation and risk skyrocketing to record levels, optimizing MRO should now be a top priority for organizations – unplanned downtime can be catastrophic. In particular, MRO materials management is ideal as a primer for methods that can be applied to both Raw/Direct and Finished Goods, helping build network resiliency in a sustainable phased approach.
Knowing where supplies are in the network, understanding the material data, and optimizing inventory targets can reduce risk and improve cash flow across the supply chain. In addition, the right MRO process will lead to smoother-running plants able to better meet customers’ needs.
Connecting different locations is a first-order objective. The cloud plays a significant role in cost savings and final product build and delivery speed. A cloud-based supply chain intelligence approach offers multiple advantages over analog inventory management. Visualization tools provide analytics around item usage history, optimized ordering to prevent stockout, and equipment management. For example, once multiple sites are connected and sharing intelligence, an AI-driven global search of materials from existing data can unlock goods or parts already stocked in the inventory across your enterprise ecosystem. This allows companies to transfer repair parts between facilities and minimize downtime quickly.
Supply chain leaders have enough to worry about across their materials network, and big improvements to MRO can jumpstart the path to greatly improved network resiliency. The benefit is that other areas of concern can be focused on for further improvements: including labor and logistics.
Once multiple sites are connected and sharing intelligence, an AI-driven global search of materials from existing data can unlock goods or parts already stocked in the inventory across the enterprise ecosystem. This allows companies to transfer repair parts between facilities and minimize downtime quickly.
Businesses need improved materials management now more than ever – and MRO should not be overlooked to improve agility and optimize cash flow. By harmonizing MRO inventory data with AI-driven tools and cloud technology, companies can realize real-time value in these challenging times.
Founder & CEO of Verusen