Supply chain resilience during COVID-19
Although the onset of the COVID-19 pandemic presented some heightened or new challenges, AECI Mining’s global distribution network still achieved On Time In Full (OTIF) delivery above 95% at the height of the resulting disruptions!
All of AECI Mining’s manufacturing facilities continued to operate and there were no unplanned stoppages. Although at times it was necessary to ration the supply of products to cushion against over-ordering and panic buying, no customer’s business was halted on the basis of zero supply.
To avoid severe disruptions, AECI Mining prepared a business continuity plan that addressed anticipated challenges and risks long before the multiple national lockdowns in several countries.
According to Denvor Govender, Executive: Global Operations and Supply Chain: AECI Mining, established and traditional business models like deep-tiering were particularly challenged in terms of their readiness and resilience to support a dynamic environment in terms of cost, demand, risk and service.
“On the one hand, suppliers were unable to produce and ship raw materials due to COVID-19 restrictions. On the other hand, demand for goods skyrocketed, causing a serious imbalance in the global market,” explained Denvor.
Initially, logistical infrastructure delays resulted in the cancellation of shipping, causing global disruption in the movement of cargo and the price thereof. On some trade lanes, the cost of shipping increased by as much as 150%.
When the lockdowns were eased, panic buying increased logistics costs further as a consequence of supply and demand imbalances. Supply lead times also increased significantly due to changes in liner services and high demand for dedicated charter vessels.
AECI Mining’s business continuity plan sidestepped these issues through the following interventions:
Locking up future raw material supply
Filling the supply pipeline
Applying nearshoring principles
Avoiding shipping delays by identifying suppliers closer to the point of use
Ensuring that, from an essential services perspective, the supply chain was geared to manufacture and distribute products
Aligning inventory strategically
Maintaining operating cash flow, thus safeguarding the payment of creditors and suppliers as well as day-to-day operating expenses
Supply chain 101
Nearshoring – where a business moves operations to a nearby country from one at a greater distance.
OTIF – a measurement of delivery or logistics performance in a supply chain. Usually expressed as a percentage, it measures whether the supply chain was able to deliver the expected product in the quantity ordered by the customer at the place agreed by the customer at the time expected by the customer.
Tiering – a form of supply base management in which suppliers are organised in such a way that only first tier suppliers deal directly with the buying organisation. Second tier suppliers participate in the same supply chain, but supply first tier suppliers who assemble or integrate before supplying the buying organisation. The practice originated in the automotive industry and allowed car assemblers to reduce their first tier supply base to below 1 000 suppliers.
