When Black Swan Supply Disruptions/Events Suspend Industry Rules and Norms

We found this curious story out of India, suggesting that Black Swan supply chain events and supply disruptions may have an impact on industry rules and norms, such as first article testing in the automotive industry (i.e., PPAP). According to the story, "The Japanese government has requested New Delhi to allow its car makers source spares from alternative destinations and exempt them from mandatory tests to prevent any disruption in their supply chain and production ... Under Indian rules, any change in components -- either brand or supplier -- requires fresh comprehensive testing and "homologation" of vehicles that runs into several weeks or months and can temporarily keep that specific model out of production." For those on both the production (including quality) and procurement side of automotive ventures, it's a curious situation indeed.

Those from the automotive sector (not to mention A&D and other) are likely to face similar first article testing requirements regardless of what geography they're operating from. In the US, the old saying goes that if you've been an automotive buyer, you should be able to work in just about any industry given the supplier management/on-boarding requirements to qualify new parts from new suppliers (and even new parts from existing suppliers using a different production facility). The rules can be so stringent (depending on a given situation) that an entire component may have to re-qualify in terms of approvals if sub-components or individual part sources are changed during production. And this, of course, is what the Japanese government is requesting to be waived in India, given the need for alternative suppliers and facilities to avoid production shutdowns.

Ironically, if such requests are not granted in India and elsewhere, the rules/norms designed to drive safety, quality standards, etc. may now end up creating supply shortages given the time to qualify new suppliers and or/facilities. On the other hand, it's a touchy situation that can open up a whole can of proverbial supply worms if exceptions are made (as they probably should be). In Spend Matters view, procurement organizations can prove themselves invaluable in such a situation by doing much of the pre-qualification work for new suppliers/facilities up-front as well as having alternative, pre-qualified suppliers/facilities ready to ramp production to higher levels in the event of supply chain Black Swans.

Jason Busch