The COVID-19 pandemic has forced companies to take a deeper look at their supply chains and how they can keep parts and products moving through unprecedented disruption.
The challenge of establishing supply chain resilience is not new, however. Bose Corp., a producer of high-end audio equipment, was forced to take a look at its own supply chain after a disruption in 2011, for example. The reevaluation resulted in a program aimed at minimizing supplier risks and planning for disruptions.
At last week’s virtual Gartner Supply Chain Symposium, Eric Dwinells, director of global supply management operations at Bose, explained why the company implemented its supply chain resilience program and how it’s helping mitigate risks.
The main goal of the program is to be prepared for any disruption that may affect supply chain performance, Dwinells said.
“It’s impossible to plan for every risk and disruption that can possibly happen — who saw COVID-19 happening?” he said. “But it may be possible to develop a supply chain resiliency program that can help sense and respond generically to any risk.”
Based in Framingham, Mass., Bose is a global audio equipment company. It operates four business divisions: consumer electronics, with products for home and mobile use; automotive, which partners with global automotive manufacturers to design audio gear for specific make and models of cars; professional products, such as loudspeakers for musicians, theatres, stadiums and restaurants; and health, which includes audio products to aid health and well-being.
The company operates a complex network of suppliers located around the world that ship raw materials and parts to Bose’s manufacturing facilities.
A wake-up call from earthquake and floods
The Bose supply chain resilience program originated in 2011, when an earthquake and tsunami in Japan and floods caused by monsoon rains in Thailand disrupted the supply chain, Dwinells explained.
Eric DwinellsDirector of global supply management operations, Bose Corp.
“We were very reactive at that point: We didn’t have a process, we didn’t have any systems in place, it was very manual, we had our commodity managers working night and day, and we used lots of Excel spreadsheets,” he said. “It took us a very long time to understand where our supply base was in relationship to the events, but also what parts were where, what products they were linked to, and what customers they were linked to.”
This became the main catalyst for Bose to develop a supply chain resilience program. In 2013, the program was proposed to the company’s top executives, Dwinells said, who subsequently invested in the program. Funding was provided to hire a supply chain manager and supply chain analyst to run the program and invest in third-party software.
“We knew we didn’t have the resources to build this internally,” he said. “We needed some systems to help us collect information and really make the program more scalable.”
Five pillars of supply chain resilience
In 2013, the company implemented a supply chain management software system from Resilinc Corp., a firm based in Milpitas, Calif. From there, the Bose supply chain resilience program was built on five pillars that are designed to help the company sense and respond to supply chain disruptions.
Site mapping. Based on the Resilinc system, this map sites where Bose’s suppliers are located and is the foundation of the Bose supply chain resilience program. Site mapping creates maps of where Bose’s suppliers manufacture parts maps the products that the parts go to, and maps the revenue by that product. The Resilinc system has dashboards that show where all the parts and suppliers are located and enable the Bose team to drill down to specific suppliers and parts. This provides the supply chain resilience team with data on where their suppliers are in each region, how many partners they have in each region, how many parts are involved, how many products and how much revenue might be affected by a disruption. If an event comes up, the system sends alerts and includes details on any potential risks.
“This gives us instant visibility when there is an event,” Dwinells said. “It’s the baseline data to manage an event, and this is the visibility that we didn’t have nine years ago.”
Financial analysis. The financial analysis pillar provides the Bose supply chain resilience program with financial data about its suppliers, including financial risk warnings. This pillar is based on supplier risk analysis software from RapidRatings International Inc., a firm in New York. RapidRatings is a SaaS offering that rates a supplier’s financial health risk on a scale of 0 to 100, and shows a risk level of high, medium or low. For Bose’s supply chain resilience program, the risk score provides insight into a supplier’s core financial health and cash flow. The RapidRatings dashboards provide visual executive summaries and detailed financial data, putting rich financial data into business terms.
“This makes it easier for our commodities managers, who aren’t financial analysts, to drive the dialogue with the actual suppliers,” Dwinells said. “If we need to escalate, the details are there and we can get our finance department to work with our suppliers’ controllers.”
Social responsibility. The social responsibility pillar tracks Bose’s suppliers for social risks such as violating workers’ rights. Bose is a member of the Responsible Business Alliance, an alliance of electronics, retail, auto and toy companies committed to supporting the rights and well-being of workers within their global supply chain, Dwinells said.
“We’ve found that in the last 12 to 18 months, our customers are asking us more and more about Bose’s social responsibility programs, and they also want to know what we know about our supply chain’s social responsibility program,” he said. “Our supply chain manager works for our sustainability manager to answer those questions for our customers and meet with our customers to answer those questions.”
Business continuity planning. This pillar in the supply chain resilience program focuses on what plans Bose’s suppliers have in the event of disruption. Bose works with suppliers to formulate backup plans and what they need to do to minimize the effects of a disruptive event, Dwinells said.
“We knew we needed to focus more on this because of COVID,” he said. “We’ll be driving more improvement in this area in the next year by working with suppliers to understand where they have weaknesses and help them put together a game plan to improve upon so they have more robust business continuity plans.”
Crisis management. While the first four pillars focus on sensing disruptions in the supply chain, Bose’s crisis management pillar focuses on the response. The supply chain resilience program’s crisis management process has three levels.
Level one focuses on initial awareness and visibility of events and the potential impact on the supplier through impact notifications from Resilinc, Dwinells said. If there’s no potential impact, the event is closed. But, if there’s a possible disruption, the crisis management process goes to level two, where commodity managers ascertain the impact of the disruption and the severity. They analyze if the disruption can be mitigated through actions like using safety stock, moving to air freight or engaging a second source.
If the disruption will affect customer delivery, the crisis management process goes to level three, activating a supply chain resiliency war room zone. This zone consists of a cross-functional team, with members from key functional areas such as logistics, supply chain demand and planning, distribution, as well as the business divisions. The crisis management war room team goes through details of the disruption, what they need to work on and what the mitigation strategy is.
“For COVID-19, our supply chain war room was set up on January 29 with daily check-in meetings,” Dwinells said. “The frequency of the meetings changes as the situation changes and stabilizes and are now weekly. Every Friday, an internal notification goes out to all of our executives and senior leadership, giving a synopsis of the status of the program.”
Sensing and response
While the lessons of the supply chain resilience program are still being gathered, it has improved Bose’s ability to sense and respond to potential disruption.
“When it came to our supply chain risk and supply chain disruptions, we felt we really need to invest in both sensing and responding capabilities,” Dwinells said. “In other words, we needed to have processes and systems in place that were both proactive and reactive.”