Understanding Supply Chain Resilience and its Role in Supply Chain
How Resilience Minimises the impact of Disruption
Skills to create supply chain resilience
What is Recovery Phase and How Supply Chain Return to Full Operations After Disruption
Key Capabilities When Building Resilience
Supply Chain Resilience Strategies
Breakdowns in the supply chain can now adversely impact your business's very existence. The supply chain is a complex network and the involved dangers, such as natural catastrophes, accidents, economic sanctions, and cyber warfare that are rising in frequency and intensity as a result of this complexity. That is the reason, resilience in supply chain management has never been more important. In another analogy, the supply chain is like a pyramid made from a deck of cards. A tremor of the earth, collapsing of transportation infrastructure, fire in the production plant, global political disruption and now the pandemic to name a few possible scenarios, could shake any card at the bottom, causing the complete pyramid collapse. In other words, if one element of the supply chain is affected, the entire network is imperilled. As supply chains become more complicated, the probability of something awry and impacting the entire system increases.
Conventionally, the supply chain was regarded just as a commercial entity. It was way too different from today’s technologically advanced supply chain, which is critical to the company's operations, reliability, and long-term accomplishment. Any chaos in the supply chain endangers the organization's expertise to undertake in this context. The remedy is supply chain resilience! Numerous scholars and leading academics state that supply chain resilience is the ability of a supply chain to not just resist disruptions but recover operational capability after disruptions occur.
Following are the top skills or steps suggested by Harvard Business Review to create supply chain resilience.
Using parallel processes rather than processes in sequence in critical stages like production, development and distribution paces the recovery process and also ameliorates the responsiveness. By opting to apply this method, global firms can easily switch their suppliers if a particular region is affected because of any natural or man-made disaster. Like in the case of the COVID-19 pandemic a good number of countries such as China, the USA, Germany and even India were affected and the supply of everything was deranged.
Standardised operations that use indistinguishable parts allow organisations to take quick actions by reallocating resources where they have the capacity or where the need is greatest. A large number of businesses are now continuously reducing risk by incorporating interchangeable parts into their product range and standardising the production processes across factories and manufacturing units.
Disruption is imminent, hence, resilience is crucial. The plan to postpone is one area. This usually covers how to delay manufacturing while still delivering to the customer. Keeping materials in partially finished form allows for greater pliability in shifting products from surplus to deficit regions. It also improves customer service while increasing fill rates and without raising the cost of inventory carrying.
The willingness of the corporation to react immediately will help decide success or failure during both the resistance and recovery phases of supply chain resilience. Organizations and participants must be allowed to make decisions and take corrective steps as fast as could be expected, as near to the action as possible.
The recent pandemic exposed overdependence on single supplier relationships or working with suppliers from a single region. It has prompted businesses to contemplate a plan of action that incorporates multi-source suppliers as a part of the resilience. The more the better!
In this last part, we’ll discuss the crucial strategies to develop supply chain resilience irrespective of the business you operate in.
We must recognise that threats can occur anywhere in your supply chain and the potential weaknesses could include:
Putting too much faith in a single supplier or distributor
A lack of traceability and supply chain self-sufficiency affects supply chain tracking and tracing.
Making inadequate use of technical digitalisation or specific innovations such as artificial intelligence (AI)
Depending on suppliers in specific nations where costing may be risky to current or future trade disputes
The strategy is to carry out a risk assessment to pinpoint the most crucial weak spots in your supply chain. If you sell a product that requires parts that are only obtainable from one vendor then it’s a different matter altogether but if not then you should be able to put things in place to boost resilience and reduce supply chain risk. Attempt to determine your limit of enduring redundancy when assessing redundancies. Supply chains always require some redundancy, so you have the adaptability to increase production as needed, but not to the moment where production and profit suffer.
Companies that distribute from a single location and get closed during the crisis are all familiar with this issue. When situations are in favour and things working properly, having all of your inventory in one location is fine. However, business owners are aware of the devastation that happens during crises like natural calamities, man-made disasters and pandemics and lockdowns. A single location approach is neither sensible nor likely to be viable in the long run. While we're discussing inventory distribution from the standpoint of supply chain resilience, it may also have additional benefits, such as:
Increasing your geographical scope
Shipping and fulfilment times are being sped up
Lowering shipping costs for both your customers and your company
If the warehouses are close to the suppliers, you can cut costs elsewhere in your supply chain.
The quality of your vendor relationships determines your supply chain's resilience. If you don't converse with your vendors and are not in sync, you reveal an unacceptable substantial part of your supply chain to significant risk. Your vendors must be clear about your anticipations and decided to meet them, whether it's about product lead times or ensuring a stable supply chain. See eye to eye on how you will analyse progress in terms of all these aspirations, and actively engage with your suppliers to enable them to improve.
Another superb strategy is to diversify the supply chain network. It helps in keeping your enterprise from disruption and inspires your vendor network to function better. You can do a lot to expand your total supply chain network, like – Making sure that your procurement department is completely capable of multi-sourcing. If you get a few distributors to provide the same item, you'll need to confirm standard equality. The probability of disruption tends to increase if your supply chain is excessively reliant on limited geography. Therefore, if near-shoring is a feasible option then go for it. By making sure that you have regionalised solutions within your network, near-shoring can improve the resilience of your supply chains.
Logistics and distribution businesses are coming to grips with unexpected demand, which is unlikely to abate in future. To guarantee transportation safety, use myriad carriers and utilize your shipping strategy fully, in addition to teaming up with global distributors. Capitalise on the skills of local distribution specialists both within your supply and distribution chains. By distributing your shipping needs between multiple suppliers, you will encounter less disruption and will be required to seek a small workaround rather than a massive one if an issue is raised. Working with local businesses can also help with the development of faith among your consumers and those in the supply chain.
Because there is very less monopoly in the market and products are so extensively available today unless you have an exclusive product with your copyrights, a shortage of supply may be the last time a customer considers purchasing from you and moving to another seller. The most straightforward way to build a more resilient supply chain is to preserve a buffer of stock on hand. It indicates that you can keep offering buyers while addressing the issues in the context. While stock buffering can be tough to explain due to the sheer amount of working capital it requires, they are worth the effort if your business can afford to stockpile a range of products to avoid shortage.
Many supply chains are relatively frangible and easily disrupted by extreme natural, political, or economic events. A slew of interconnected business trends has heightened their relative vulnerability during a period in which the variety and intensity of threats have increased. This helps to explain why supply chain management and resilience are such hot topics these days. Academics, consultants, and others have conducted extensive research over the last two decades to improve understanding of supply chain risk profiles and resilience options. There are now numerous conceptual and analytical frameworks, as well as planning tools, available to assist businesses in developing risk and resilience strategies. A critical trade-off between efficiency and redundancy in global supply chain management is at the heart of these models. The high cost of supply chain disasters in the 90s indicates that this trade-off must now be rebalanced in favour of risk mitigation and resilience.
Corporate Communications Specialist