Another hot topic brought on by COVID-19 is global supply chains. Supply chains affect almost every aspect of our lives, but if you don’t own a company or manage the supply chain at your company you may not have been thinking about supply chains before this pandemic. In this post we’ll also discuss what we’ve done in the past with our own supply chain, which has paid dividends in these times.
A supply chain is any system of organizations, people, activities, information and resources involved in supplying a product or service to a consumer. Typically with goods, the supply chain begins with raw materials and ends with the product in the consumer’s hands. The reason supply chains have been a topic of discussion recently is because of the global nature of supply chains. For many businesses the manufacturing of products relies on the collaboration of a number of different countries.
With the dependencies on other countries to deliver a final product, COVID-19 has raised some issues with even our own supply chains, as factories struggle to produce, and logistics companies slow down shipments. It goes to show how quickly things can fall through if you are reliant on a country, like China for example, to produce even one portion of your final product. In early 2020 when COVID-19 was in the early stages in Wuhan and other regions of China, we saw a lot of factories and manufacturers having to completely shut down production for 5 weeks, starting with the Chinese new year 2-week shut down, followed by the China mandated quarantine period. Meanwhile in Canada and the US, clients and consumers were still expecting products to be delivered because we weren’t experiencing any COVID related shutdowns at home. We felt this pain first hand during the first quarter of 2020 when our printed circuit board (PCB) supplier disappeared for 5 weeks.
Since then there have been a number of examples of how supply chains can be threatened by forces out of your company’s control. McDonald’s Canada is now having to source their beef from outside of the country because the Canadian beef supply chain has slowed down. In turn, cattle farmers are worried they won’t be able to profit off of their stock.
A few weeks ago we saw the United States threaten to stop 3M from providing Canada with N95 masks needed for our healthcare workers, if this had gone through there would be a serious scramble to find those resources elsewhere.
So whether you rely on an entire supply chain to create the product you sell or your business is part of a larger supply chain it’s easy to see how quickly profits can be lost by one or more elements in the chain.
We’ve learned through this time that diversifying your supply chain is the most important thing you can do to ensure production stays consistent. While not always feasible, keeping your supply chain within the borders of your own country (Canada in our case) can help in a number of ways. Keeping payments to other suppliers in your local currency means you’ll never be overpaying if currency rates shift, especially like they have been between Canada and the US dollar. There are also less issues with packages coming through the border or shipping times when shipping within the same country.
It is also important to have alternative suppliers for as many components of your supply chain as possible. Regardless of global crisis, suppliers can have production shut down, run out of stock or be on backorder. Building relationships with other manufacturers or companies that can provide you with the materials you need means that if one of your suppliers is unable to meet your needs you can quickly pivot to your alternate supplier and experience little to no interruption to your production schedule.
One of the best strategies we’ve employed is forming a producers co-operative with other hardware startups. Our version of this producers co-operative is called the Microfactory Co-operative. This co-operative is essentially a low cost, rapid-prototyping, and small scale manufacturing and assembly house. It is funded by several members who make use of the Microfactory. Our Microfactory is capable of making and assembling circuit boards, injection molding, 3D printing, and we even employ two engineers. This Microfactory has given us supply chain stability, on-demand manufacturing (aka just-in-time), and has been popular even with non-members, who we take on as clients.
Having alternate supply sources is always a key to weathering a supply chain storm, just like the current one we’re in right now. And if your interested in forming your own Microfactory, reach out to us, we’re more than happy to talk supply chains and small scale production runs!