As we look back upon the global pandemic that was Covid-19 we can now clearly see the impact it had on manufacturing. Specifically, the impact it had on supply chains. The global impact was felt from raw materials to components to finished products.
Over the last few decades companies have been involved in ways to become more lean in their manufacturing practices. One of the methods used was to incorporate lean principles when it came to inventory management and actual inventory levels. A common practice used by companies was called Just-In-Time (JIT) inventory management. This philosophy, devised by Taiichi Ohno at Toyota in Japan, is meant to reduce inventory levels. This allows companies to free up cash and eliminates the expense of carrying material in their plants. While this system was widely used throughout the world, it became strained and, in some cases, fell apart shortly after the Covid-19 outbreak in the spring of 2020.
Companies quickly had supply chain issues that became enormous hurdles to overcome. Nothing happened quickly during the first six to 9 months – JIT systems were struggling. Companies were forced to work through a limited amount of inventory they had on hand and then had to begin to formulate a plan on how to replenish critical inventory. The problem was that the global manufacturing community was burning through all available stock of raw materials, components, and finished products. The delay that was seen early on was due primarily in raw material production. As raw material production began to catch up companies had to formulate plans on how to acquire the necessary materials to ensure they could produce their finished product to the market. The solution that many companies adopted was to forecast and buy as much as inventory possible for not just current requirements, but for 6, 9 and 12 months in the future. With lead times on materials three to four times longer than pre-pandemic levels, companies were forced to abandon the Just-In-Time philosophy. The result of this meant companies would be carrying much more inventory than they had in the past.
Over the past 12 months many companies were still working through that inventory causing a slight lull in purchasing. We have now seen lead times go back to what we saw pre-2020 and companies are now moving back towards a normal purchasing schedule.
What the past 3-4 years has done has forced companies to reevaluate their supply chains and how they manage them. Supply chains are becoming more diverse and more sustainable. Companies are working closer and collaborating with their suppliers to strengthen their relationship to be able to work through any vulnerabilities.
Galaxy has always been very aware of its customers’ needs and understanding that lead time and on-time delivery are critical to their business. We have an incredibly diverse supply chain that we’ve developed and cultivated over 29 years. This has allowed Galaxy to support its customers supply needs during the past few years when the world was seeing supply chain issues.
– Eric Lutz, CEO, Galaxy Wire & Cable
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