The last decade was a redefining era for global supply chains in many ways. Acceleration of e-commerce, the rise of Amazon, and events like the COVID-19 pandemic have put a new supply chain priority into the spotlight — supply chain resilience. Additionally, these factors have exacerbated already existing issues within the industry, such as capacity shortages, increasing globalization, and economic pressures. With too many unprecedented risks occurring, companies are now trying to form a strategy that will make their supply chains less prone to emerging issues, regardless of their size and impact. Supply chain flexibility has become a new focus for supply chain executives around the world.
Many organizations have undergone notable disruption due to the COVID-19 pandemic, which has demonstrated how unprepared supply chains were for such events. In fact, a survey by Jabil stated that nearly 80% of supply chain executives said that the pandemic has impacted their operations more than any previous disruption, and 95% said they care about supply chain resilience. By their nature, supply chains are like live engines, and these ecosystems are now more complex than ever.
To proactively manage exceptions, there is a need for transparency, flexibility, and connectivity at every stage. Ultimately, this boils down to the conclusion that businesses will want to eliminate the consequences of disruptions, and even more — prevent them from happening in the future at any cost. That’s why risk management and supply chain resilience will become essential priorities for companies in the upcoming years.
Supply Chain Resilience: What You Should Know
Supply chain resilience is the company’s ability to face and overcome supply chain challenges utilizing existing resources and with minimal disruption to the supply chain. Basically, it is the ability to stretch without breaking and get back in shape as quickly as possible. According to the Michigan State University definition, supply chain resilience is the capacity to resist and capacity to recover from various supply chain disruptions.
Resistance to emerging issues indicates a supply chain’s capacity to minimize the damage of disruption, and recovery is the supply chain’s capacity to quickly return to regular procedures after an unprecedented event. Resilience in supply chains is heavily reliant on agility and transparency across every operation and transaction.
The Role of the Supply Chain Risk Management Strategy
There are numerous successful corporations with strong supply chains, but recent events have shown that even seemingly large and equipped businesses have endured a lot of frustrating and costly consequences due to the pandemic. While no organization is immune to risks, some companies definitely recover faster and experience less damage than others. The clue to this difference lies in their risk management strategies: companies with robust and well-thought-out risk management strategies in place are better able to navigate difficulties. Proactively managing possible risks and achieving end-to-end visibility is what enables supply chain resilience, which is the main differentiator for businesses today.
The problem is that many supply chain executives put risk management down the business list or implement some half-hearted measures simply to tick the right boxes, with real actions often only taken when something damaging has already happened. Until recently, resilient or agile supply chains weren’t such hot topics because nobody could see such a slew of disruptive events occurring.
However, this doesn’t mean that only massive events matter. Eventually, supply chain risks encompass things like natural disasters, capacity shortages, production issues, logistics bottlenecks (like the recent Suez canal blockage), and shallow relationships with suppliers. There are many other factors that interfere with supply chain operations daily, so building a flexible supply chain is a win-win strategy for any scenario.
To Implement Best Practices for Risk Management, a Business Should Answer the Following:
- What threats does your company currently face?
- What outcomes would those risks produce?
- What’s the likelihood of these risks happening?
- If the risk is likely to occur, is a plan of avoidance in place?
A Strategy for Building a Resilient and Agile Supply Chain
Another challenge with building an agile supply chain is understanding that this alteration doesn’t happen overnight and doesn’t have to be disruptive to the business flow. It is a careful yet effective approach that involves slowly detecting the weak points in the supply chain and steadily working towards preventing any possible risks.
Proactive – Identifying Risks Before They Occur
Identifying feasible risks is the initial step in the roadmap to a proactive supply chain. Often, executives underestimate how many ‘unpredictable’ risks are actually lying on the surface. Analyzing all former disruptions that happened within a supply chain can help distinguish weak spots and repeatable patterns. For instance, whether there is a consistent failure with inventory, inbound shipments, or last-mile delivery. Huge and significant disruptions are not the only ones businesses can gain valuable experience from. Small mistakes occur daily and are also worthy of attention in order to build resiliency. However, even proactive supply chains find it impossible to adequately estimate risks and possible outcomes if the supply chain lacks visibility.
A Connected Network of Suppliers
Trusted relationships with vendors and suppliers are a major part of a successful risk management strategy. Apart from clear communication and shared values, supplier visibility is what enables credible and long-standing relationships. Having clarity in transactions and operations adds more confidence and credibility to all parties involved. In terms of agility and flexibility, having a wider network of suppliers makes the business less prone to disruptions, as there is less dependency on one particular vendor. Diversifying suppliers and building a transparent, connected network of supply chain partners is an imperative for successful risk management and supply chain resilience.
Proactive Standard Risk Management Procedures
Before diving into innovative and transformative processes, it is important to make sure the company complies with basic rules and standard practices for risk management. This involves engaging your suppliers in vendor compliance programs, creating and following guidelines for inventory management, operations, and product manufacturing. Implementing these fundamental practices across all facilities and processes makes the proactive supply chain way more agile and less prone to risks.
Supply Chain Visibility & Digitalization
Having a transparent and well-integrated supply chain is the main factor that enables true resilience and agility. Visibility and simultaneous control over processes not only allows for the detection of issues at an early stage but also the ability to quickly react to emerging challenges and prevent them from becoming calamitous.
In the modern supply chain environment, supply chain visibility and digitalization are the key driving force for a proactive and resilient supply chain. The integration and interconnection of all parts of the supply chain are heavily reliant on the company’s digital infrastructure. Processes can be broken down to a granular level, which allows for the detection and prevention of risks at the early stages. Data centralization also provides valuable insights and a complete picture of the supply chain. Eventually, more data enables supply chain agility, accurate forecasts, and better risk management.
Proactive and Agile Supply Chain with Automation Software
Data centralization and robust, integrated digital infrastructure are the drivers of end-to-end visibility, and consequently, agility. Eventually, resilience can be gained with a high level of supply chain transparency and connectivity. Investing in sophisticated digital solutions for data centralization and automation will be listed at the top of business priorities in the near future.
Tech solutions like supply chain visibility platforms are an essential tool for proactive supply chain transformation without disruption. They can help companies streamline processes, track shipments and transactions in real-time, see historical data, and investigate supply chain gaps. In addition, data centralization software helps companies enhance relationships with suppliers, improve on-time delivery rates, reduce operational and labor costs, automate processes, and improve collaboration and communication within the supply chain.
Agistix’s robust visibility software can help tackle visibility challenges without disrupting your company’s business flow, as a seamless integration process requires no change to your regular operations. Check out Agistix solutions today!