Three Strategies for Dealing with an Uncertain Supply Chain

De-Risking the Supply Chain: Tactics That Reduce Exposure

As the pandemic ebbs and flows, so too have supply chain disruptions. OEMs and consumer packaged goods companies (CPGs) alike realize that shortages and delays are still happening and are likely to continue into 2023.

But as manufacturers adjust to these conditions, which we’ve been dealing with for two years, there are strategies that will help overcome supply chain volatility or at least mitigate its worst effects. Through our research at PMMI, the Association for Packaging and Processing Technologies, we found collaboration, digitalization (the use of digital technologies to change a business model and provide new revenue/value-producing opportunities), and supplier flexibility to be the most effective means to keep production running smoothly.

Collaboration is Key

In a 2022 PMMI report, we found that supply chain issues are still among the top five concerns of CPGs. The report, which came out of discussions between OEMs and CPGs at PMMI’s Top to Top Summit, highlights the need for collaboration with stakeholders to be proactive and ever-present to work through supply chain challenges.

When fostering a collaborative environment, respondents said communication is the most important element and emphasized the importance of quality, reliability, and profitability. Successful collaboration also means involving all stakeholders. This helps suppliers gain the insights that let them provide input and ideas. Such knowledge and interaction are especially valuable when new products, packaging or production lines are being developed.

To maximize collaboration, summit attendees also recommended:

Formulating milestones before, during and after projects.
Ensuring alignment of time, budget, and scope.
Tracking project performance.

In the pharmaceutical industry, for example, closer collaboration with OEMs and suppliers is helping overcome shortages and delivery delays in packaging materials, raw materials, equipment, and parts. Pharmaceutical manufacturers say they want OEMs and suppliers to help add new machinery and maximize machine flexibility. In addition to providing equipment support, this collaborative approach opens opportunities to digitize processes for greater productivity and visibility.

Embracing Digitalization

Digitalization supports the collaboration needed to proactively identify and mitigate supply chain problems. This is a key factor in why the pace of digitalization is accelerating, particularly in the pharmaceutical and food industries. The pharmaceutical industry is relying on digitalization to help it meet the requirements of the Drug Supply Chain Security Act, address cybersecurity concerns, achieve operational visibility, and support blockchain product tracking, according to PMMI’s latest research.

In the food industry, digitalization is helping address product visibility requirements of the Food Safety Modernization Act. Greater visibility requires more complete integration between end-of-line operations and enterprise resource planning systems. It also improves shipment tracking, enables better forecasts of production needs, and ensures timely product deliveries.

To achieve the needed level of supply chain visibility, many CPGs are adding enhanced labeling technology such as Quick Response codes, near-field communication labels, and radio frequency identification tags to tertiary packaging. These smart labels provide more reliable and accurate visibility into product production and distribution, and they enable efficient tracking of shipments in the event of a recall.

Flexibility with Suppliers

With ongoing uncertainty around material sourcing, the last strategy our research revealed is to remain flexible. CPGs are having to accept a wider range of materials as they experience shortages at different times. As a result, manufacturers need equipment that can handle different materials with greater variability in quality and consistency.

That means it’s imperative to have several sources and be ready to shift suppliers for product components, processing and packaging equipment, and materials themselves. When selecting suppliers, CPG companies should confirm that those suppliers comply with industry standards and company specifications and check that they provide added value not available from other vendors. Ask if these suppliers have local support available, and do they rely on proprietary components or software? If so, a shortage or delay could develop into a major bottleneck. This flexibility reinforces the importance of both collaboration and digitalization.

One recent bright spot has been the resumption of in-person events such as trade shows, which can provide opportunities to meet with various suppliers and see new machinery up close. For example, Pack Expo International is returning to Chicago this October, and other major industry events are taking place again after the pandemic-related disruptions. Taking advantage of these and networking opportunities, manufacturers can identify sources they need to keep production running smoothly.

Only by working together with partners and by leveraging the latest technological advances can manufacturers meet and overcome challenges from ongoing supply chain uncertainties.

Jorge Izquierdo is VP of market development at PMMI.