For Technicolor, supply chain lessons from the recent past have helped the company brace for and respond to the current crisis being driven by the new coronavirus.
Technicolor, a key supplier of set-top boxes and cable modems and gateways, has been grappling with and fixing supply chain disruptions for a couple of years, explains Eric Rutter, president of the North American cable sector for Technicolor.
On that point, he harks back to memory pricing increases and a multilayer ceramic capacitor (MLCC) shortage that had caused havoc in the past couple of years, along with more recent moves made to help mitigate tariffs sparked by the US-China trade war. With respect to the component shortages example, Technicolor was forced to conduct some on-the-spot buying and to more closely coordinate with manufacturers on how to optimize supply chain continuity.
While those events don’t correlate directly to the size, scope and sociopolitical implications represented by the current COVID-19 scenario, they still helped to prepare Technicolor for the present situation, Rutter said.
According to Rutter, a sizable piece of that preparation stems from the company’s adherence to a principal called C.A.R.T, an acronym for continuity (adding degrees of redundancy), agility (having access to multiple options), resilience (rebuilding and restarting operations as necessary) and transparency (telling it like it is, even if customers and internal higher-ups won’t like to hear it).
“This has helped us to prepare for this COVID-19 situation and, more importantly, how we have reacted and been proactive with our customers in communication with what the associated supply chain risks are,” Rutter said.
Rutter said Technicolor formed a crisis management team in January directly related to the COVID-19 situation based on the early signs it saw coming out of China and how that might affect the company. That meant monitoring the workforce recovery there, monitoring component flow, and being in ongoing, direct contact with people on-site and with logistical vendors (ocean, air, trucking, etc.) to fully understand where components were in their routes to factories.
On the transparency side, that likewise meant reporting to customers where things stood on a weekly or sometimes twice weekly basis, or more.
The resilience side of the effort included access to second sources and the ability to quickly pivot to other suppliers when necessary. While Technicolor began to see a full recovery emerge in China about 60 days after shutdowns there, it is now starting to see similar COVID-19 issues crop up in other areas that had helped to bridge the gap, such as Vietnam, Malaysia, the Philippines and Thailand. But the combined effort has put Technicolor in position to weather the storm, Rutter said.
“We see a full third-quarter recovery for the supply that we were impacted by in the second quarter,” he noted. “We’re really trying to manage this on a full-year view.”
Rutter said the current crisis could cause some service providers to reassess or change how they manage the flow of consumer premises equipment (CPE). While there are economic advantages to just-in-time manufacturing, it’s likewise important to establish supply chain continuity. As crises crop up and dissipate, balancing those two are critical.
But in the long run, service provider execs will look at supply continuity as a more advantageous philosophy, even if it carries a small premium, Rutter predicts.
“The fallout associated with their brand and the customer experience is probably more impactful in the long-run than the minimal cost differences between just-in-time manufacturing and supply chain continuity,” he said.
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— Jeff Baumgartner, Senior Editor, Light Reading
