In today’s global economy, supply chain managers need to be resilient to maintain their position and credibility in an increasingly competitive market. Therefore, strategies need to permeate all levels of the supply chain to provide a whole-of-business approach to resilient programming and encourage collaboration. To achieve this, supply chain managers must understand the forces that make them more vulnerable than their competitors and find ways to avoid these risks. In most cases, this will require fulfillment services, suppliers, and carriers to work together with a common goal.
A supply chain is resilient when it can:
- Minimize damage and losses
- Restart operations quickly once the disruption has passed, and
- Return to normal operations as rapidly and efficiently as possible
Strategies for supply chain resilience traditionally focus on managing supply and demand against forecasted demand, but other areas require attention. Supply chain managers need to focus on the following four pillars:
- Product development
- Transportation management
- Supplier relationship management
- Distribution strategy
However, to develop strategies that will make your supply chain more resilient, you need to understand the future risk of disruption. Some risk factors include:
- Global growth of demand for resources (e.g., energy, food)
- Global political upheaval (e.g., war, terrorism, corruption)
- Compliance with new laws and regulations (e.g., healthcare reform )
- Demographic changes (e.g., aging population)
- Infrastructure changes (e.g., increased use of automated transportation)
- Changes in technology, especially in the Internet of Things (IoT)
- Increased connectivity between supply chain partners
Reasons Why Your Supply Chain Needs to Be Resilient
First, suppliers and customers are increasingly demanding products and services delivered at certain fixed times and, in some cases, in specific locations. These demands make it harder to ship components, finished products, or services on time.
Second, your supply chain is becoming increasingly complex because of new technologies and changing demand patterns for both business-to-business (B2B) and enterprise-to-customer (E2C) activities. Take B2C as an example; demand is taking place online through various channels such as e-commerce portals. This means that your supply chain has become more complex because of the number of different communication channels and the location of your customers. As a result, it is much harder to control and track inventory.
Finally, there is an increased focus on efficiency and even greater emphasis on cutting costs—in most industries. This means that companies are operating leaner at all levels of the supply chain. In addition, companies are looking for ways to reduce their carbon footprint while maintaining profitability and satisfying their customers.
Once you have identified why your supply chain needs to be resilient, think about your company’s resilience strategy. Here are four strategies to make your supply chain more resilient.
Inventory & Capacity Buffers
Adding inventory buffers to your supply chain gives you the flexibility to respond quickly when an interruption arises in production or demand. In addition, it helps you ride out small bumps in the road without experiencing major setbacks due to shortages or disruptions.
However, the right inventory buffer level is a tricky balancing act. Too little, and you won’t gain any real benefit over a lean operation. Too much, and you’ll be wasting money on excess inventory. The only way to determine the optimal buffer level for your supply chain is to do a detailed analysis and simulation of your industry’s supply and demand curves.
Diversify Your Network
A network is only as strong as its weakest link, so it’s important to build your supply chain from multiple sources. If one supplier can’t deliver because of an interruption or disaster, there’s always another one that can fill in and keep operations running smoothly.
When you rely heavily on one particular manufacturer or distributor to supply all the parts you need, it becomes easy for a small problem at the source to escalate into a major disruption for your whole operation. So it’s also important to spread production across multiple locations if possible. For example, a company that makes tires should consider outsourcing some production to another country. Then, if there is an accident at a single facility, you’ve still got outlets where you can make the product.
You need to thoroughly prepare for any potential disruptions in your supply chain, so you’re not caught off guard when they happen; this is where the rest of the strategies in this list come into play. Planning also helps you avoid added costs that come from last-minute changes in orders or expedited shipping.
It will also enable you to avoid the additional stress of having a product sell out and needing to rush more out to stores. However, put in mind that the unexpected will still happen, so you need to be ready to adapt and respond as necessary.
Form a Crisis Management Team
Building a team of people who can respond quickly and effectively in an emergency is another key component of building a resilient supply chain. Having this type of planning in place gives you access to physically and mentally prepared people to handle issues that come up, whether it’s a disaster or someone is acting irresponsibly. These team members should also be trained on the procedures for handling these types of events if they arise, which will help ensure their readiness even if something unexpected happens.
Additionally, a quick-response team will allow you to address problems before they escalate and become larger issues, which not only helps you respond better, but it also saves time and money.
A flexible and responsive supply chain is a must for any enterprise that wants to avoid disruptions and remain competitive. The four strategies outlined in this article will help you build a more resilient supply chain that can be flexible and ready for whatever might come your way. Be sure to also involve your workforce in planning and working toward a more resilient supply chain. Employees are often the best resource for identifying possible areas of improvement.