Oct 20, 2020

Pandemic Tests Flex’s Supply Chain Resilience

This article was originally published on EPS News.

Lynn Torrel, Flex’s chief supply chain and procurement officer, was three months on the job when a deadly viral outbreak locked down Wuhan, China. The global electronics manufacturer knew its employees, operations and supply chain faced an unprecedented challenge.

“In mid-January we were hearing about the outbreak in Asia, and through talking with our suppliers, customers and government contacts in Asia-Pacific we had an early heads-up that this would seriously impact our employees and operations,” Torrel said.  “One of our regional managers recommended we go out and buy 60 days’ worth of masks immediately.”

Flex operates 19 facilities in China and employs 80,000 people in the Asia-Pacific region. Its Chinese workers were largely at home celebrating the Chinese New Year, so Flex had a narrow window to prepare for an epidemic. It immediately deployed PPE, implemented social distancing and evaluated on-site sanitation.

“Our first move was to ensure the safety of our employees,” said Torrel.

The $24 billion electronics manufacturing services provider (EMS) also managed relationships with 16,000 suppliers and 1,000 global customers. Component supplies in China were already tight and the supply chain anticipated shortages.

“We immediately put a flag on our system on parts from China and stopped any action to push out or pull in orders,” Torrel said. “We didn’t want to lose our ‘place in line.’ We then reached out to suppliers and asked them to reconfirm outstanding purchase orders.”

Flex had contact information for key suppliers but not for its entire supply base. Within 48 hours Flex had that data.

“We sent out the letters reconfirming purchase orders plus what potential impact they were experiencing because of Covid,” Torrel said. “A lesson learned was we needed more geographical information from our suppliers because just ‘country of origin’ was too broad.”

Flex has 10,000 vendors that manufacture in China.

Flex also reached out to customers to verify their demand. “We worked as closely and compassionately as possible so they could get that information back to us,” Torrel said. “Many couldn’t get back into their offices.”

When the virus moved to the Philippines, Flex turned to its pandemic playbook and as it spread there were closures and re-opening of factories and constant management of the supply chain. “Our first concern was protecting our employees and then mitigating the supply chain impact on our partners,” said Torrel.

As the coronavirus advanced around the globe, Flex’s procurement team implemented daily status calls (5:30 a.m. in Torrel’s time zone) to monitor the supply base.  “I wanted to hear from everybody and then prepare to make multiple decisions,” said Torrel. The process was discuss, debate and decide.

“What was interesting about the daily calls,” she added, “ is we would go around the room and talk about everything. When European borders began to close, we discussed that most of our PPE equipment was  hubbed in Hungary. We decided to move that in advance of border closings.”

Flex, manufacturing, Torrel, Covid-19, coronavirus, supply chain, test, Flex's supply chain, resilienceSource: EPS News

Nine months into the pandemic, Flex’s procurement team did an outstanding job, Torrel said. “We managed to mitigate the impact on our customers and I’d say we did a good job of supporting them and, at the same time enjoyed the way we were able to work with our supply base.”

For example, Flex experienced no project delays stemming from logistics. “We have a global freight and logistics team who work very closely with our sites and segments to secure the required allocations for Flex,” Torrel explained.

The pandemic, though, has exposed vulnerabilities in the electronics supply chain. Digital transformation is spotty, at best, and access to offices and facilities is restricted. There is still a heavy reliance on manual processes.

“Historically, supply chain decisions have been driven by  efficiency and low cost, but the complexity in today’s supply networks has been decades in the making,” said Torrel. Many companies are accelerating their investment in the digital supply chain.

Flex’s digital platform, Pulse, was launched in 2015. The system utilizes digital, mobile, and cloud-based technologies to provide the company with the ability to communicate, share data and provide an accurate picture of the global supply chain. Eight global sites are equipped with dedicated Pulse centers that serve as physical locations for in-region and global collaboration. Daily, the system handles 40 TB of data; 2.2 billion records and more than 200 data streams.

During the pandemic, Flex transferred projects when necessary and redeployed personnel where needed. “Automotive was decreasing and medical was skyrocketing so we moved resources to support those businesses,” said Torrel.

Overall, the electronics industry has been hard hit by the pandemic. Flex’s Q1 fiscal 2021 sales were $5.15 billion, down 6 percent sequentially and 17 percent from the prior year. Q1 adjusted operating income of $163 million reflected the impact of pandemic-related expenses. Adjusted net income was $116 million and earnings per share was $0.23, down 13 percent year-over-year.

Torrel doesn’t use the words “trial by fire.”

“It’s been exactly a year at Flex and it has been a great experience,” she said. “The learning curve was considerable but the culture is great. Yes, we had the tools but it took procurement professionals and the leadership team working together to manage through this.”

Image via EPS News

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