Pinch Points Affecting Supply Chains
Last week, I discussed some of my more general risk mitigation strategies. This week, I’m going to focus on a specific example of a pinch point within the supply chain. A pinch point is a product that has limited sourcing options.
Winter storms causing supply disruptions
In 2021 and 2022, we experienced supply disruptions within our refrigerated systems category despite being sourced with multiple suppliers. In February 2021, the south-central region of the United States experienced an extended cold snap with record cold temperatures. This severely impacted infrastructure from sleet covered roads to the failure of the energy grid. Manufacturing and production plants across the region were forced to close for days to weeks.
Our diversified Tier 1 supplier base failed
One of these manufacturing plants is the sole producer of a specific molecule used as a foaming agent for insulation in refrigeration systems. Almost immediately, our suppliers lost access to this molecule which limited the production of our insulated refrigerated cases. This was a critical situation for our company and directly impacted active and future projects.
Our options to address this shortfall were limited. We sought to:
- Reduce the short-term requirements for refrigerated cases
- Secure commitments to limited volumes of the restricted molecule.
- Identify alternative chemical and insulating solutions.
- Identifying pinch points at all levels of the Supply Chain
This situation led us to become more critical of our supply chain and to identify pinch points throughout all levels of the supply chain. Our supply chain consisted of the refrigerated case manufacturers (Tier 1), insulation manufacturers (Tier 2), blowing agent manufacturer (Tier 3), and chemical producer of the allocated molecule (Tier 4). In our case, we were diversified at Tier 1, but all of our suppliers were purchasing the restricted product from one producer at Tier 4. When that producer was compromised, we were out of business.
My strategy to mitigate the risk of pinch points
Here are steps you can take today to plan for the risk of pinch points in your supply chain.
- Identify strategic suppliers.
- Identify strategic products.
- Work with suppliers to determine at-risk components and commodities used in the manufacturing process.
- Identify alternate sources of component products.
- Address product design to create alternatives should a product become scarce.
More Supply Chain topics next week
I hope you find this useful as you continue each of your supply chain journeys. Next week, I will touch on another supply chain topic. You can follow the link below or reach out to me directly to learn more about Lumatrak.
Lumatrak’s PULSE software offers you tools that will help make sense of the chaos by connecting the processes, systems and communications supporting your purchases from the time of purchase to final delivery to your site.