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How COVID-19 is Affecting the Supply Chains of OEMs, and What They Can Do to Assess and Adjust

OEMsBy Justin Metzger, AEM Public Relations Manager

There’s not a sector of the economy that COVID-19 hasn’t impacted. In the manufacturing sector, working from home is, largely, an unavailable work system. While laptops travel home easily, CNC machining centers, hydraulic presses, blast furnaces and pneumatic tool systems do not, to say nothing of getting parts and products from station to station.

“Administration and sales functions are operating fairly well,” said Trevor Stansbury, supply chain expert and CEO of AEM member company Supply Dynamics, Inc., provider of the SDX multi-enterprise platform. “Manufacturing and assembly, however, are a yellow flashing light.”

SDX is a software-as-a-service solution provided by Supply Dynamics that helps manufacturers assess the production readiness of their suppliers, and their suppliers’ suppliers, all the way down to raw material and component part vendors.

The two main causes of disruption in this pandemic are demand reductions related to global stay-at-home orders, and social distancing requirements making logistics within more confined shop floors difficult to navigate.

“Our platform is used by companies to understand the materials that are common across an extended value chain,” said Stansbury. “Among other things, we collect data on natural disasters that can impact multiple tiers of a supply chain, for example hurricanes, floods, and earthquakes. We also keep a close eye on wholesale distributors, where 70 percent of materials that go into construction and agriculture products pass through.”

For more information and resources on COVID-19, visit the COVID-19 section on the AEM website

Stansbury said the biggest effects that can be attributed to the COVID-19 pandemic are in the assembly operations of OEMs and their Tier 1 suppliers. He can see this thanks to the recent SDX integration of up-to-the-minute epidemic data, compiled by the Centers for Disease Control and Prevention (CDC) and Johns Hopkins University. The data Supply Dynamics sees gets down to the county level for the U.S., and can show provincial-level data for Canada, and other levels of granularity globally.

“We started seeing disruptions early on in France and Italy,” said Stansbury. “With that information, manufacturers are able to prompt affected suppliers to report on production readiness in SDX or simply export a spreadsheet and make a few phone calls.”

Supply Dynamics operates beyond just the ag and construction manufacturing sectors, boasting more than 10,000 suppliers across the automotive, construction, heavy industries, agriculture, power generation and aerospace industries. 

Stansbury said he believes that, while top-tier assembly operations are seeing the biggest effects of the COVID-19 pandemic, he’s keeping his eyes trained on the lower tier raw materials suppliers, as the risk remains high, and the volume of data available on their operations is still unclear.

“Raw materials are a vulnerability to watch in the long term,” he said. “The picture is still crystallizing as there is not a lot of data available at this point. However, that’s one area where we’re looking at distributor-level data as a proxy.”

Regardless of what level of the supply chain a company exists at, Stansbury said he believes the pandemic, and its effects on supply chains in all industries, are going to permanently alter the way manufacturers operate.

“OEMs will require a greater degree of transparency and visibility from their suppliers. This trend was already underway before the pandemic, but it is really going to accelerate now,” said Stansbury. “The takeaway is that companies don’t compete against companies anymore. Supply chains compete against supply chains. COVID has simply shined a light on that. To be successful in the future, you have to manage what’s going on outside the four walls of your factory.”

Ultimately, Stansbury believes end-to-end supply chain visibility will be a major differentiator, giving manufacturers a way to stand out in their industry. Being able to produce a quality product is important, being able to consistently produce it even during a global disruption is a difference-maker, so much so, that the U.S. Department of Defense is exploring SDX software as a means to monitor its own supply chains.

To learn more about AEM’s efforts to support the equipment manufacturing industry, visit the COVID-19 section on the AEM website. If you have questions or need to get a hold of AEM staff, please e-mail our Response Team at [email protected].

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