In simple words, supply chain resilience means the ability of a supply chain to promptly recover from any abrupt change in operating factors. It is the collective ability of stakeholders to absorb, avoid and contain systematic and unsystematic risks arising from all types of disruptions.
Disruptions in the supply chain can result from:
These factors tend to decouple the functions of manpower, insights, resources, finances and logistics.
Most people interpret supply chain resistance only in the context of resisting the negative effects of a disruption. Supply chain resistance also refers to the ability of the supply chain to adapt itself and uphold efficiency and effectiveness in supporting the value chain.
Ever since the industrial revolution, trade and commerce have been evolving at an increasing pace with each passing year. New technologies, innovations in business practices and changing socio-economic conditions have led to a continuously changing market. As a result, it becomes necessary for every organization to continuously evolve to meet rising market demands.
Supply chain resilience requires an organization to adapt, innovate and adapt its business processes in the face of uncertainty. Unplanned disruptions at any point along the supply chain can produce a cascading effect and if unprepared, can challenge a company’s stakeholders ability to respond to change.
A survey from the Institute for Supply Management finds that 95% of businesses dealt with operational troubles during the initial days of the pandemic in April 2020. This revealed that a majority of businesses need to undertake proactive measures to build resilience.
They should also collaborate with other non-competitor stakeholders to foster resilience if required.
A resilient supply chain is one that is capable of reacting and readjusting to external and internal changes. This flexibility ensures undisrupted production, which is the key to business survival during turbulent times.
However, true resilience doesn’t come merely by reacting to disruptions but by anticipating them before they cause serious damage. Any organization that achieves this, achieves a significant competitive edge.
There are many aspects to building a resilient supply chain. They all combine to create healthy, robust supply chain mechanisms.
Here’s a detailed look what goes into building supply chain resilience:
Every supply chain has numerous parts and they’re all of varying importance. In times of crisis, an organization may have to rationalize expenditures and choose only the most important .
Identifying the areas that are instrumental in keeping the supply chain going is an important skill. An organization that determines its priorities out well in advance is in a much better position to make these choices based on data rather than intuition.
The warrior who best knows the chinks in his armour is likely to be the last one standing. The same is true for companies that make an effort to understand their vulnerabilities. When companies continually monitor their weaknesses and shortcomings, they have a much better chance of strengthening their supply chain.
In a world filled with uncertainties, challenges and disruptions can come from any quarter. Factors such as pandemics, rapidly changing trade policies and socio-political imbalances are all capable of throwing your supply chain into a tailspin.
Therefore, it’s important to keep a close eye on your dependencies and always strive to minimize risks by having sufficient contingency plans in place at all times.
To create resilient supply chains, a company must create a culture where risk awareness is considered across all business processes. Employees involved in designing key areas of the supply chain must at all times remain vigilant of possible risks and make decisions accordingly.
For example, if a company has to choose between two vendors where the price difference is minor but one of vendors is based out of a remote location, the company may decide to go with the more centrally located vendor even if they are costlier.
Companies who stay vigilant to global conditions tend to react faster to supply chain disruptions. Take for example the Covid-19 outbreak. No company around the world could have anticipated the far reaching consequences of the disease. However, studies show that companies who kept tabs on the day to day spread of the disease and reacted accordingly fared much better as they had an early mover’s advantage.
Supply chain resilience is a hot topic around the world today. Recent events in the past couple of years have rekindled people’s interest in creating shock-proof supply chains. Investing in resilience and strengthening of supply chains has several advantages. Here’s a look at some of them:
For a supply chain maverick, being in control of the supply chain is crucial as it directly translates in being able to withstand disruptions. Resilient supply chains result in a much sought after competitive advantage. Companies around the world today achieve solid results by relying on cloud-based supply chain management tools. These tools provide real-time information to management and provide a bird’s eye view of the entire supply chain.
Investing in technology that can predict and mitigate risks has been a top priority for companies around the world and rightly so. Supply chain resilience increases efficiency and creates robust supply chains that can withstand unforeseen obstacles. Technology can help companies monitor global supply chain threats in real time and give them enough time to make the necessary adjustments and steer away from potentially threatening situations.
A resilient supply chain is one that can meet disruptions head on. Companies who invest in supply chain resilience software see much shorter product development cycles and time to market ratios compared to those that don’t.
This increase in the overall efficiency is one of the main reasons why companies are increasingly looking to adopt inventory and order management software solutions.
Global supply chain experts say that supply chain resilience has been a top priority for companies around the world, especially in the post pandemic world. When a company strives to build sustainable and resilient supply chains, it inevitably leads to a significant increase in productivity.
There has never been a better time to work towards creating more suppliers for your raw materials than right now. With the world going through major tectonic shifts, it is only wise that a company knows its options.
Supply chain resilience involves diversifying vendors for all your raw materials. When you diversify your vendors geographically or based on any other benchmark, you significantly reduce your dependency on any one of them and give your company more options. This may impact your prices in the short term but will pay off eventually.
The supply chains across the world were functioning in full swing, eliminating inefficiencies, standardizing pretty much everything and building upon the progress made in the previous two decades. It was all functioning wonderfully until catastrophe struck – the Covid-19 pandemic and subsequent lockdowns.
As a result, industry leaders in all sectors have recognized the need for resilience in supply chains. Supply chain blocks worldwide need to restrategize, reorganize and repurpose and make important adaptations. Innovation will play a pivotal role in the transition process as the cost factor will continue influencing every decision. In this article, we will explore the six pillars of supply chain resilience that will help shape the future of the global economy:
Inconsistencies aren’t exactly new for supply chain stakeholders, but businesses need to build contingency plans in case of another wide-scale disruption. Stakeholders need to classify all suppliers into multiple tiers and analyze the level of difficulty to replace them.
Businesses also need to understand their internal disruptions like production or procurement failures to design their workflow processes for better resilience. External factors like fluctuations in demand, scarcity of raw materials, consumer complaints and changes in legal frameworks should be programmed to pre-defined organizational SOPs. This also includes product strategy and the ability to improvise your business model.
Organizational structure and management are two of the most important factors that define your resilience. To begin with, you may analyze your staff’s competence and multi discipline capabilities to understand how well they can respond to internal and external changes.
Next, businesses will need to develop relevant employee development programs to help them take on dynamic market challenges with greater proficiency. Attributes like emotional intelligence will therefore find greater relevance in addition to more traditional skill sets. Company management plays a vital role in setting up new parameters for the supply chain and devising operational policies.
One of the most credible pillars of tomorrow’s supply chains is the transition operations from a process-oriented to an objective-oriented approach. The tradeoff between efficiency and versatility lies in leveraging innovation to achieve objectives over process optimization.
When an organization turns its focus toward an objective-based operation, it is more prepared to meet any challenges encountered at volatile supply chain nodes, dial in risk management factors and weather changing priorities among multiple stakeholders and customer segments. This approach will help every stakeholder’s ability to support the transformation of the overall supply chain without significantly impacting their individual efficiencies.
Fostering transparency is a dimension that has received significant importance in the past, but we need to redefine it for the changing conditions. In the past, transparency was limited to the logistics aspect of the supply chain. We suggest integrating sales forecasting insights and operations data throughout the value chain to help all stakeholders function at higher efficiency. Transparency also requires stakeholders to use new tools and technologies like blockchain to safeguard individual and mutual interests.
Transparency should also help in risk mitigation as unprecedented shocks like industrial accidents, terror attacks, natural disasters and infrastructure failures can be absorbed more efficiently. The cumulative data on how such incidents are handled by other organizations, how communication helps coordination and careful financial management can add tremendous resilience to the global supply chains.
We can consider technology adoption as one of the toughest challenges as it requires one to invest in tools, resources, training and the maintenance of interconnected solutions in your tech stack. Adoption of new technology fosters collaboration and allows stakeholders to learn how to function at even higher efficiencies.
Until now, it was the norm to use tech tools internally. Many organizations faced conflicting situations where departments might refuse to share insights voluntarily. Tech adoption should facilitate smoother exchange of insights that, in turn, provide a platform for greater functional efficiency at each point in the value chain. Here, we would also like to emphasize the need for IR 4.0 technologies to provide a reliable and efficient base for innovative interfacing strategies that leverage operational flexibility. However, even the adoption of inventory management systems is yet to witness significant market coverage.
Last but not least, one must find alternatives to relieve existing bottlenecks and roll out a strategy that encourages balanced procurement among multiple vendors. For instance, the semiconductor shortage that has impacted global supply chains across industry verticals calls for careful planning.
Businesses will have to rethink their strategy when it comes to sourcing. It is recommended that businesses identify new suppliers and work towards capacity building to avoid a dependency on any one supplier. A systematic approach to balancing and sourcing supplies from multiple vendors will help businesses limit loss of business when one particular source suffers a stock out.
“We already know the solutions we need to implement for a resilient supply chain. We have deliberately overlooked the potential risks in pursuit of economic gains with complete review of sustainability from the equation.” This observation remains at the core of this article, and thus, the process of securing resilience based on these six pillars will require initiative over inspiration.
Since the beginning of time, or at least since the beginning of supply chains, there has been some risk associated with their longevity and sustainability. Before there was the lightning fast connectivity that we enjoy today, supply chains relied heavily on traditional modes of communication like mail and messengers. The world might have come a long way from that, but so have the challenges.
In today’s times, especially after having witnessed a deadly, global pandemic, it’s safe to say that supply chains face unprecedented challenges from a variety of quarters. We’ll take a look at each one of them and how they affect the supply chain.
Indent orders are orders where a customer places an order with a company and the company purchases the product from a third party, due to a variety of reasons. Such orders are common while dealing with trading companies who don’t manufacture or store products but simply trade them.
It’s no secret that the COVID-19 pandemic has caused some of the biggest supply chain disruptions in modern history. Global supply lines remained partially or fully shut for months, caused partially by travel bans imposed by governments.
Billions of dollars worth of raw materials and finished goods were stuck in major ports around the world and caused businesses to bleed money for every second they remained stuck.
As a result of all of this, companies have started looking for ways to build a much more resilient supply chain to thwart any such challenges that may arise in the future. Corporations are moving to diversify their sourcing and their markets in a bid to decrease their dependencies on any one particular region that may face future lockdowns.
Even as the dust is starting to settle around the pandemic, the world may never return to how it was before. We’re already witnessing some dramatic changes in consumer demand patterns across industries. The restaurant industry is now actively moving towards balancing between dining and takeaway as more and more people are ordering from the comfort of their homes.
Similarly, while some offices may open up again, many companies are allowing employees to work from home partially or fully. This means that the demand for automobiles as well as fuel is set to go down globally. Moreover, since most people now prefer shopping online, we could see a rise in warehousing facilities and a drop in brick- and-mortar retail stores.
All of these changes pose immense challenges to traditional supply chains and will force them to evolve in order to cater to the changing needs of the world.
With the rapid increase in connectivity came the rising tide of ecommerce that lifted small and big players alike and leveled the playing field. Now, a company in the Netherlands can just as easily ship products to Singapore as one in the US and vice versa.
Today, ecommerce giants like Amazon offer ultra-quick delivery services around the world. This places immense pressure on supply chains to churn out products quickly in order to stay competitive.
As the world gets increasingly divided into camps and clubs, we’ll be seeing more and more trade policies between members of these camps. While any trade policy is better than no trade policy, exclusivist policies fail to solve supply chain problems in the long run. They end up making countries dependent on a finite number of partners for their supply needs and hence increase the risk of disruptions.
Supply chains can potentially make or break a business. Supply chains are the lifeblood of a retail business. They nourish and sustain it, allowing it to grow and thrive. However, this movement of materials can often face resistance due to a variety of factors. These are called supply chain risks.
Supply chain risks can occur due to a range of issues. However, the result is more or less the same – production comes to a grinding halt and the bottom line turns red.
Hence, companies must make it a priority to ensure that their supply chains are not disrupted by taking some preventive measures. Here are some common types of supply chain disruptions and a few tips on how to avoid them:
Operational risks are those that occur due to organizational breakdowns. Reasons could be as simple as machine breakdowns due to poor maintenance or as complicated as senior management overestimating their company’s production capacities.
This results in shortage of goods, disrupting the supply chain.
Financial risks are risks that emerge due to any unseen changes in any one suppliers’ finances and revenue. A supplier may file for bankruptcy or reduce production due to heavy losses.
There are instances where companies are faced with lawsuits. These lawsuits can range from intellectual property disputes to environmental issues.
Irrespective of their nature, lawsuits are a great risk to a company’s reputation and eventually their ability to deliver. If a supplier ends up on the bad side of the law, a company’s entire supply chain could be disrupted.
Globalization has led to supply chains that traverse across geographical boundaries. It is no longer necessary to source all your raw materials from one region. Most companies today procure raw materials from around the world. Faster connectivity means that they can source the materials from a number of vendors across the globe, finding the desired quality at optimal prices.
However, each region has its own socio-political realities. Turbulence in politics, policy changes, changes in government, conflicts and extremism can all affect a supplier’s capacity to deliver raw materials on a regular basis.
Companies and government policymakers have become concerned about supply chain resilience. In recent years, research findings have been published that emphasize this problem in a worldwide economy. The Covid-19 pandemic only heightened these long- standing issues. Organizations must optimize their planning for predictable outcomes and strengthen their supply networks to resist major disruptions. This strategy demands resilience rather than a risk management only focus.
The supply chain, although being a critical component of any business strategy, is largely unknown to the general public. However, it is via the management of tasks and workflows that firms can govern their production and procurement. Supply chain resilience provides a significant competitive edge.
The supply chain refers to the entire network that transports goods and services from the point of origin (the supplier) to the point of destination (the consumer). Physical flows (warehouse storage, truck deliveries, etc.), as well as information and financial exchanges are all part of this network.
The term “supply chain management” refers to the process of coordinating this network. The goal is to optimize advantages for consumers (satisfaction and loyalty), sales (profitability) and the environment by coordinating operations to meet regulatory compliance (physical operations and information flow).
The supply chain’s scope is thus not confined to warehouses and product transportation but includes everything from product development to customer satisfaction monitoring. All with one important goal in mind: ensuring that a company’s activities are in sync with the process. The goal of this strategic strategy is to “tear down silos” among a company’s many sections.
Modern businesses require more robust supply networks to ensure that they can continue to produce despite obstacles. People, processes and technology are the three fundamental elements of a strong supply chain resilience strategy.
Look for experienced engineers, procurement specialists and supply chain managers to bolster current staff and assist the organization in navigating a challenging business climate. Simultaneously, search for market experts that can assist the organization in staying ahead of market trends.
When employees are empowered by effective, robust systems, they do their best work. Companies must improve their operations in the following areas to manage component shortages and obsolescence, as well as to strengthen supply chain resilience:
Technology can assist companies in completing the procedures listed above more quickly and accurately. Real-time analytics and decision support technologies such as enterprise resource planning (ERP) and electronic data interchange platforms can for example assist in providing baseline data. Important data inputs may require expenditures in financial, manufacturing and competitor studies.
A back to basics approach can be key to a resilient supply chain (18%.) These basics can be divided into seven categories that should be phased in systematically:
Because it affects all areas of a firm, supply chain management and long-term success relies on certain business principles that must be mastered. These include inventory management, forecasting and procurement, sales planning, KPI formulation and overall cost control.
A healthy supply chain requires alignment of a company’s numerous operations. Many questions must be explored since major competitive variables are at stake. To answer all of these questions, a tool called “Streamline” can be used. It assists teams in altering their work processes and breaking down departmental walls while working on unique datasets that are understood and shared by all.
Streamline is more than just a supply chain program, it’s a transformation strategy that includes all aspects of the company’s operations and that requires the full backing of senior management.
A supply chain strategy must be reassessed regularly due to consumer expectations for ever-greater speed, dependability and services, as well as demand for cheaper or even free delivery and recent catastrophes. This goal can only be realized if procedures are updated regularly and can be applied quickly, allowing for quick decision-making at multiple levels (tactical and local).
Without visibility into costs, winning strategic choices aren’t possible. It is critical to bring financial insight into all supply chain scenarios available to decision-makers. The goal is to shift away from volume-based analysis and toward cost-based analysis and eventually, margin-based analysis.
The requirements include a thorough awareness of expenses across the full value chain, such as through end-to-end mapping. The costs of manufacture and distribution, as well as product returns and destruction (when they are no longer usable), as well as customer relationship and information system costs, may then be calculated. All of them need to be considered for viability vs. their long-term sustainability. Also try to increase your options when it comes to suppliers.
In supply chain management, data production, enhancement and exchange are critical. Data from products and services, capacities, stockpiles, order and delivery monitoring and customer satisfaction result in a complete picture. The goal remains the same: communicate information to increase efficiency.
Digital adoption is a powerful component of the overall strategy for achieving this goal. It’s critical to create a balance between the complexity of the solutions and the complexity of the activity in an enormously broad and moving ecosystem of solutions.
Continuous monitoring is required for a robust supply chain. Today’s enterprises often lack understanding of what’s going on with their vendors and customers at various levels. Relationships with vendors that are vital to a company’s success should be frequently cultivated.
It’s crucial to identify problems before they become major roadblocks, such as malware infiltrating your network or a computer part arriving late. Knowing about problems as soon as they develop helps you to look for alternatives and keep clients informed.
A sustainable supply chain is required for a sustainable business. Because transportation has such a large influence on carbon emissions, the logistics chain plays a critical role in “scope 3” management. The phrase “scope 3” refers to any greenhouse gas emissions that aren’t directly tied to a product’s creation, such as procurement, transportation and consumer usage. A sustainable supply chain also aids in the maximization of recyclable solutions resulting in zero-waste management.
Supply chain resilience necessitates a comprehensive approach, an organization’s commitment, extensive data collecting, the establishment of common metrics, process alignment and the necessary financial investment to minimize the identified risks. Making your supply chain more robust is a critical task that requires time, effort and skill.
Business continuity management is only one aspect of supply chain resilience. Resilience may also be a competitive advantage for your business. While this approach will work for all players, you will need a lot of customization to reap measurable rewards.
Supply chain resilience has been one of the top concerns for organizations of all sizes, but larger organizations seemed to manage it better owing to their resources. Smaller businesses that were conceived during the pandemic and the ones that managed to stay afloat will be naturally more resilient but they will need to include dynamism and flexibility as a core component of their DNA, be it operations or product life cycle management.
When approached correctly, supply chain resilience is neither complex nor unachievable. However, the process requires constant vigilance and the creativity to develop innovative solutions that add value to the process instead of trading off existing value. Cin7 is one of the most popular inventory and order management software solutions in the industry and it is a market leader when it comes to driving insight-based change. Cin7 publishes various blogs, ebooks and other educational materials for the community so make sure you follow Cin7 for more business advice and strategies as we all navigate through Covid-19.
