As a result of the severe business disruptions brought about in recent months by the pandemic, many businesses have been reconsidering how to retool their supply chain to build in more resiliency.
From digitizing the supply chain to developing more local and regional components, businesses are finding new and innovative ways to strengthen their capacity to keep moving forward during crisis. Building this kind of resiliency is all about expecting and planning for a variety of emergencies.
“Supply chain resiliency is the ability to recover quickly from an event that has disrupted [the] supply chain,” Peter Edlund, chief solutions evangelist at DiCentral, told the E-Commerce Times. “To develop supply chain resiliency, organizations must establish an emergency management plan that includes the processes and technology that will enable consistent visibility and communication across the entire supply chain.”
Preparing for widespread structural disruptions is a vital part of making sure that business can continue no matter what happens in the world.
“Supply chain resiliency is the ability to handle supply shocks, such as a production lines going down, and recovering with minimal impact to your business and customers,” Mukund Acharya, vice president of consulting with GEP, explained to the E-Commerce Times.
“An external shock, which we are all experiencing right now, is far more structural and challenging. While there are certainly companies that don’t run ‘lean’ and have enough inventory stock of product to mitigate short-term disruptions, most global manufacturers have now been forced to build supply chain resilience on the fly — while cutting costs to preserve cash — and adapting quickly to big swings in demand,” added Acharya.
Strategies for Resilience
Identifying potential disruptions and alternate suppliers, as well as digitizing data in real time, are all key components in developing supply chain resiliency.
“The way to develop resiliency is to understand potential sources of disruption and make the investments to address them,” said Acharya. “Today, many of our clients are actively vetting alternate suppliers to diversify their supply chain geographically.
“Several of our clients are also connecting real-time independent data feeds — such as commodities pricing, weather forecasts, port and factory closures, and public health information — into their supply chain reporting dashboard in order to foresee disruptions quickly.”
Technologies that allow for digitization of information about every part of the supply chain are also key to managing and responding to potential disruptions.
“Global supply chains are increasing in complexity and involve huge amounts of data,” Acharya added. “Efficient supply chains are managed on a cloud-based software platform that captures data from millions of point of sale nodes, and accurately reports on inventory levels for tens of thousands of SKUs in real-time.
“For instance, retailers that have invested in their supply chain technology are able to pool their inventory to ensure customer demands are met. Once you’re digital, the business benefits can be fully realized.”
Location, Location, Location
Another component of supply chain resiliency involves looking into alternate suppliers, including some that might be more local or regional.
“Companies need to eliminate single points of failure right from raw materials and processing services to distribution,” Sanjeev Sularia, CEO of Intelligence Node, told the E-Commerce Times.
“Diversifying the supply chain by employing multiple suppliers, with some operating at a local level, can create a safety net and ensure business continuity in times of such global upheaval.
“It can help leverage additional networks across supplier pools, manufacturing, and distribution. There are also significant advantages for buying local: transportation costs are considerably cheaper; the degree of visibility greater and overall risk and uncertainty reduced. Such benefits may offset the price hikes,” Sularia added.
Diversifying a supply chain helps to build in flexibility in the case of crisis.
“Understand that diverse supply chain doesn’t mean starting from scratch or relocating the entire supply chain,” explained DiCentral’s Edlund. “It means broadening the scope of your supplier base, so when supply chain disruptions occur, a comprehensive action plan is in place to get the right products to the right people at the right time.”
It’s not only about developing local and regional links in the supply chain, however. It’s also about thinking about all kinds of ways to build flexibility and responsiveness into that chain.
“It’s difficult to recommend reshoring, as a broad-based strategy as every organization and supply chain carries a different set of challenges and risks,” said Edlund. “Supply chain relocation and diversification involve broadening the scope of the supplier base in addition to the geographical location.”
Even service companies can think of diversifying the talent supply chain, since there can be resiliency in getting away from a model of all employees being located in one central building.
“One of the interesting takeaways from the current economic crisis is that professional service companies are waking up to the fact that their talent can be located any place which provides them with surprising resilience,” said Acharya. “Traditionally, professional service firms — management and marketing consultants, lawyers, accountants, etc. — were keen to be in the same metro-area as their clients.”
Diversification, ultimately, will be key to moving into an uncertain future while mitigating risk.
“To protect against particular markets or products struggling in a time of crisis, businesses can look to diversify risk by branching out into new markets and expanding their offerings,” Iain McNicoll, vice president and regional head of the Americas for Payoneer, told the E-Commerce Times.
“This applies to both the demand and the supply side of a business and can help to spread the impact of potential losses. The companies that fare best will be those that think of themselves as merchants rather than focusing on a specific product. These businesses will be better able to understand and adapt to changing consumer needs.”
Supply chain resiliency involves, ultimately, developing the capacity to respond efficiently and intelligently to whatever happens in the world — and to make whatever decisions need to be made to keep business moving forward, even in the face of a crisis.
“A resilient supply chain has the capacity to overcome disruptions and continually transform itself to meet the changing needs and expectations of its customers, shareholders and other stakeholders,” Abe Eshkenazi, CEO of the Association for Supply Chain Management (ASCM), told the E-Commerce Times.
“In order to develop resiliency, management needs to make a long-term commitment to building an agile, flexible organization structure and supply chain and integrating risk management into all of the organization’s decision-making processes.”