Shortages of products from toilet paper to microchips have highlighted the value of supply chain resiliency, and the opportunities for companies that aren’t as prepared as they would like.
A supply chain built for resiliency allows a company to adapt to unpredictable forces while maintaining customer service. By contrast, supply chains that are too lean may not have enough flexibility and redundancy to survive unscathed.
A resilient supply chain incorporates alternative sources, carriers, routes, and other characteristics so that it can flex in response to a situation. Whether it’s a pandemic, severe weather events, trade disputes and tariffs, economic upheaval, or even unexpected surges in customer demands, you can’t prepare for every eventuality. Large companies with a supply chain risk strategy already in place couldn’t fully cope with the impact of the pandemic. Even in the worst of times, a resilient supply chain bends and stretches but never snaps.
A resilient supply chain doesn’t happen on its own. It’s the result of a deliberate strategy that may require tradeoffs compared to other approaches. Your plan should address technology, processes, and people. To build supply chain resiliency, leaders should consider these factors:
Buffer inventory and shift away from JIT. The coronavirus disruptions highlighted the stressed nature of lean and just-in-time inventories. Those factories with essentially zero inventory of critical components were forced to close or drastically scale back. To increase resiliency, consider broadening the supplier base and adding local or near-shore sources. Analyze the inventory of materials or products necessary ensure there’s enough on hand to span brief interruptions. This strategy requires greater investment and inventory carrying costs but enables continued production.
Utilize a TMS That provides real-time data to remain agile. Many companies rely on data that may lag several days.. During a crisis, that’s entirely too late. Look for a TMS or a managed transportation services provider with the technological capability to provide real-time data to drive optimized decision-making. Pricing may vary significantly based on carriers and lanes and capacity constraints. For example, GlobalTranz’s Cost Prediction Model provides intelligence on pricing and market trends via a live dashboard. Shippers, brokers and 3PLs could adapt to rapidly changing market conditions during the pandemic.
Work with a supply chain expert to identify your vulnerabilities. Tap external expertise to assess supply chain risks and develop plans to adapt to them. An experienced provider like GlobalTranz has developed strategies for many other shippers and can adapt successful strategies for a customized resilience plan.
Build relationships with your 3PL for capacity and alternative shipping solutions. Start with moving from transactional to strategic relationships in which all parties have a long-term mutual interest. When disruptions happen, and they will, your strategic partners are invested in your success. A savvy 3PL can tap their relationships to uncover capacity and alternative solutions that would otherwise be unavailable to shippers.
Build organizational resiliency to support your supply chain strategy. Your organization must develop the capability to detect, resist and recover from disruption, regardless of the source. Build a strategy with the technology, people and processes that provide real-time visibility and analytical support to data-driven decision-making. There will be tradeoffs between cost and efficiency, and each organization must decide on its own terms how to solve those issues. But the pandemic highlighted the ability of companies who had already planned for disruption to bounce back, ahead of their competitors.
Collaborate With Customers and Suppliers. While come companies are looking at supplier diversity, in some cases there are simply no alternatives for off-shore suppliers. Cloud-based collaboration tools connect suppliers and service providers for faster, more efficient shared processes, regardless of the time zone where the work occurs. Companies that remove friction in their ability to collaborate will be better prepared to establish alternative supply chain options.
Redesign your network. Supply chain networks often grow organically as the company scales, so they are rarely designed. A thorough analysis can pinpoint redundancies and opportunities to slash costs and improve service through operational improvements. A well-tuned supply chain is better equipped to deal with disruptions than an ad-hoc system that’s stressed at the best of times.
Building supply chain resiliency starts with a commitment that the status quo is not good enough. Communication, technology and collaboration are key elements that support the strategy to prepare for the worst. The effort will pay off in a supply chain that performs optimally in the best of times as well as in the next crisis.