Effective measures to make your supply chain resilient
Globalization has led industries to conduct businesses in a borderless and more interconnected manner, which may frequently result in a lack of visibility into supply chains. This loss of control has made businesses so vulnerable that industries in almost all sectors have experienced at least one instance of supply chain disruption in the last few years. According to the BCI Supply Chain Resilience Report 2017, derived from 400 responses in 65 countries, 65% of the respondents had experienced disruption, of which 55% of the incidents stated a loss of productivity to be the most common consequence. Parallelly, impacted companies lose their share price by 7% on average as a result of supply chain disruptions.
It is now critically important for CFOs to distinguish and mitigate risks to secure stability and thereby create long-term business value.
A focus on moderate inventory, low-cost labor hires, or compressing redundancy can make the supply chains lean and brittle. Businesses must instead focus on performing a business impact analysis of their operations as well as their extended supply chains to learn of financial risks and map out the worst-case scenarios. Only then can they lay out potential solutions that can help reduce the expenses in the long run and improve the overall performance.
Here are some ways organizations can ensure visibility and build greater resilience into their supply chain:
- Understand the risks : With at least 80% of the organizations being concerned about supply chain resilience, a vital starting point would be to understand the risks associated with each supplier and the likelihood, significance, and the means to neutralize such risks. By integrating risk awareness into the supply chain design, organizations can balance proactive risk management capabilities. This could involve building extra supplier options or additional reactive measures that can correct the problems as they emerge. In addition, diversifying the supply chain can protect the business and the risks suppliers may face in case of a disruption. Such proactive mitigation capabilities can increase the built-in resilience and shelter the important segments of the supply chain.
- Adopt standardized processes : Supply chain flexibility can withstand consequential disruptions and effectively respond to demand fluctuations. One way of achieving built-in flexibility is by adopting standardized processes and mastering the ability to swiftly push production using interchangeable or generic parts, cross-training employees, and banking on identical parts and processes across the organization. All of this allows the company to respond quickly to a disruption by reallocating resources to the highest requirement in case of a disruption.
- Identify strategic priorities : Switching to concurrent processes instead of sequential ones in key areas such as distribution/production, product development, and the like can speed up recovery and improve market response, in addition to providing collateral benefits. Further, in case of an emergency, businesses can promptly assess the status for every activity if they align the supply chain activities in a way where they can view the operational areas simultaneously.
- Map the vulnerabilities : From regulatory compliance mandates, political turmoil, and increasing customer expectations to rapid technology changes, economic uncertainty, and more, today’s supply chains are vulnerable on many fronts. Therefore, understanding where the organization’s vulnerabilities lie can make the supply chain resilient and help implement mitigation measures when a disruptive event occurs.
- Maintain supplier relationship : Whether organizations rely on an extensive supplier network or only on a small group of key suppliers, they must maintain significant relationships with each. Knowing about each trading partner and their capabilities can help detect potential supply problems and deal with them beforehand in case of any unforeseen circumstances. A monitoring system can also address the suppliers’ resiliency gaps, ultimately leading to an effective resiliency and transparency in the organization.
It is clear that an effective way to safeguard against supply chain disruptions is to be proactive and to consider a long-term view when building the supply chain. Organizations can combat disruptions with better planning, strategies, collaborations, and operations by implementing a strong corporate culture, flexibility, and Six Sigma practices to speed up the process of recovering after deformation on respective parts along the supply chain.