The COVID-19 pandemic provided an eye-opening demonstration of how disruptions to our supply chain can drastically impact on our global economy, as well as our daily lives. Here, we’ll discuss the importance of building a resilient supply chain and explore the strategies and technologies required to enable its success.
According to the ASCM Supply Chain Dictionary, resilience in the supply chain is the ability to return to a position of equilibrium after experiencing an event that causes operational results to deviate from expectations. Resilience can be improved by increasing the number of response options or decreasing the time to execute those options. Resilience is also improved by risk monitoring and control.
The fragility of the supply chain became evidently clear during the pandemic. The truth is that shutdowns due to any emergency –– pandemics, weather, labor disputes –– prevent suppliers from meeting demand. The result? Operations come to a screeching halt, and inflationary pressures appear across the global economy.
In addition to shutdowns, we learned that other dangers pose a risk to supply chain stability, such as lack of diversification. If your company depends on one or even a few suppliers, and they are no longer available, your products will be impacted. And if your suppliers and partners are deeply interconnected, a data breach at one will affect them all.
Establishing resilience within your supply chain safeguards your organization from these disruptions and enables protection and contingency plans to buffer the impact should an emergency occur. A resilient supply chain is critically important to your company’s ongoing success because it empowers your company to
Supply chain resilience works through the implementation of specific operating procedures, including:
Strategies such as modular production, automation and demand forecasting will accelerate the agility of your supply chain and minimize the risk of disruption.
By integrating AI, blockchain and IoT technologies into your supply chain operations, you’ll gain a new level of visibility and control over every touchpoint, providing you with the information you need to make data-driven decisions, optimize resources and proactively mitigate risks.
Multi-sourcing from different suppliers and diversifying geographically, both globally and locally, can protect you by giving you the freedom to pivot to a different partner should a problem arise.
Buffer stocks or safety stocks provide a cushion during times of unexpected demand spikes or supply chain disruptions. Maintaining dynamic stock levels and strategic stockpiling of critical items or raw materials with long lead times help provide this buffer.
By employing the previous operation procedures, you’ll be able to establish the following, critical pillars that support ongoing supply chain resilience:
There are several proven actionable strategies you can put in place to create supply chain resilience:
Reshoring means bringing production or other operational processes back to the company’s home country. Nearshoring means relocating production or sourcing materials from providers in neighboring countries. Both strategies will help shorten your supply chain and protect you from disruptions in international freight movement.
Sourcing from multiple suppliers or manufacturers reduces your reliance on a single source for critical components or materials. It’s important to identify alternative suppliers and build relationships with them in advance to create these redundancies and safeguard your procurement.
Implementing advanced analytical software will allow you to base your decisions and strategies on accurate data so you can better anticipate market fluctuations and adjust your procurement, capacity planning and market activities.
Many companies used to implement a just-in-time approach to inventory management which allowed them to minimize holding costs. However, it made their supply chains more vulnerable to disruptions. A more effective option is to follow a just-in-case approach, which increases the inventory levels of critical components and materials. Holding larger safety stocks will allow you to buffer against supply chain glitches.
Supply chain control towers (SCCT) provide real-time, end-to-end visibility into your operational workflow so you can track and trace all the goods throughout every stage and across all tiers of the supply chain. Having such a holistic picture will enable you to identify potential disruptions early and respond proactively.
Advanced demand forecasting and predictive analytics are at the core of modern inventory management software (IMS). Accurate forecasting will allow you to adjust your inventory levels proactively, reducing the risk of shortages or surpluses. Other advanced technologies like Artificial Intelligence (AI), The Internet of Things (IoT), Blockchain and Global Trade Management Software will give you increased visibility and control at every touchpoint.
Effectively managing a working relationship with your suppliers ensures a seamless supply chain and reduces the risk of disruptions to your company. AI-based supplier management solutions can also help you audit your supplier network, assess their performance and identify risks before they arise.
Integrating the following technology solutions will help you build supply chain resilience:
AI can provide advanced analytics and predictive capabilities to provide you with complete visibility into your supply chain. According to Forbes*, AI can identify supply chain risks early, potentially saving 10% to 20% of procurement costs.
Automation streamlines repetitive tasks like order processing, inventory management and shipping, reducing human error and speeding up operations. This increases supply chain efficiency, ensuring processes continue smoothly, even during disruptions.
Databases store and organize critical supply chain data, allowing real-time access to inventory levels, supplier performance and customer orders. Centralized and well-managed data enables faster decision-making and more effective risk mitigation, enhancing resilience.
ML models learn from historical data to identify patterns and predict future supply chain events, such as demand fluctuations or supplier delays. These predictive insights allow you to adjust strategies, improving responsiveness and resilience preemptively.
This enables on-demand production of parts and products, reducing the need for extensive inventories and mitigating supply chain disruptions caused by shortages or transportation delays. It offers flexibility in manufacturing, strengthening supply chain adaptability.
Measuring the effectiveness of the below key elements of your supply chain resilience will help you identify areas for improvement and ensure your supply chain is optimally protected against any potential disruptions:
This refers to the amount of time a supply chain can continue functioning after a disruption before running out of critical resources, such as raw materials, components or products. You can measure TTS by running an inventory data analysis.
Tracking recovery data and improvement metrics will measure time to thrive and show you how quickly your supply chain can implement changes that lead to competitive advantages after a disruption. It will show you how resilient your supply chain is in long-term strategic growth.
Time to recover is a fundamental metric to measure how quickly your supply chain can rebound after a disruption. A shorter TTR indicates effective contingency plans, alternative suppliers and flexible logistics are in place. You can measure TTR through real-time monitoring of key metrics, scenario-based simulations and historical data analysis.
A stress test model is a simulation technique that evaluates how a supply chain performs under extreme or unexpected conditions, such as natural disasters, supplier failures or sudden demand surges. It involves artificially stressing the system to assess its vulnerabilities and recovery capabilities.
The following links provide more in-depth information on other supply chain topics:
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