Tuesday, September 26, 2023

Supply Chain Resiliency: What It Is and How to Get It

For decades, supply chains have been built and operated on the just-in-time model, in which supplies, materials, and parts are shipped right before they’re needed. This strategy worked well for a long time and allowed companies to pare down their logistics costs to the bare minimum. 

But just-in-time supply chains are inflexible. They rely on carefully synchronized operations between suppliers, warehouses, and manufacturers. When COVID-19 disrupted global supply chains in 2020, it immediately became clear that something new was needed — supply chain resiliency.

Building some resilience into a supply chain allows for it to adapt to sudden changes with quick changes of its own. Resiliency and robustness in a supply chain allow it to keep functioning when disruptions occur, and recover faster from shortages and other disruptions. To add more resilience to your supply chain, you need data analytics tools to get real insights into how your supply chain network operates in real life. Then you can start to build in buffers and redundancies, nearshoring, rapid detection, and other safeguards that can allow your supply chain network to easily overcome disruptions.

Get the Data You Need

Data analytics and machine learning technologies are making it easier to get a deeper insight into your supply chain network design and how the supply chain is functioning. You can use supply chain data analytics tools to both cope with and avoid disruption. Data analytics can tell you things like how long your shipping routes are, where your facilities or retail outlets are clustered, and what demographics are using your retail outlets and facilities. 

You can use this data to streamline shipping routes, choosing routes that allow for more nearshoring, faster delivery times, and less shipping damage. Artificial intelligence (AI) tools can anticipate potential supply chain disruptions and give you options for dealing with them. Data analytics tools are no longer just something that’s nice to have. They’re a necessity in today’s volatile and uncertain climate.

Add Redundancies and Buffers

Not too long ago, it might have been impossible to convince executives to build redundancies and buffers into a company’s supply chain design. Redundancies, which usually take the form of multisourcing products, materials, and parts from more than one supplier, weren’t seen as necessary before COVID-19 came to completely disrupt global supply chains. But these days, supply chain disruptions have become a fact of life, and the just-in-time model just doesn’t work anymore. Redundancies ensure that you’ll still have access to a manufacturing facility if your primary one gets shut down due to a COVID outbreak, for example, or that you’ll still have a source for the materials you need if there’s a shortage. Building in inventory buffers — that is, having access to extra inventory as a hedge against shortages — is now no longer seen as an unnecessary expense, but a cost of doing business.

You’ll need an intimate knowledge of your supply chain. Every supplier and vendor doesn’t play the same role – some may offer absolutely essential materials and services, and if they failed to do so for any reason you’d experience significant disruption. Others are less important. You should assess each of your suppliers and vendors according to the revenue impact they’d have in the case of a disruptive incident.

Trade Offshoring for Nearshoring

The emergence of globalization in the 1990s saw supply chains begin to stretch around the world. Barriers to trade dropped and manufacturing costs did too, thanks to many companies outsourcing work to cheaper labourers abroad.

But now it’s the age of nearshoring. Nearshoring involves bringing back work from overseas and moving it closer to home. While it might cost more upfront, it will typically bring in more revenue as local sourcing has gained a lot of public support in recent years. Customers are more likely to buy from companies that they feel espouse their own values, such as an interest in contributing to the local economy, hiring local people, and using local supplies and materials. 

You’ll find that when you source more of your supplies and materials closer to home, your supply chain will be stronger and more robust. You’ll be less vulnerable to things that are going on in other parts of the world, like political unrest or terrible weather, that might otherwise disrupt your supply chain. You’ll be less at the mercy of other countries’ shortages and trade wars. You’ll be able to consistently provide the service your customers expect.

A resilient supply chain is one that can be adjusted on the fly to adapt to sudden changes and disruptions. Add some flex to your supply chain network, so you can stay abreast of a changing world.


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