8 Strategies to Build A Disruption-Proof Supply Chain | FreightPOP

8 Strategies to Build A Disruption-Proof Supply Chain

Managing and Designing Supply Chain Resilience

8 Strategies to Build A Disruption-Proof Supply Chain

Trade is chaotic. Duties fluctuate, tariffs change, and global events often make it impossible to conduct commerce in affected areas. These supply chain disruptions can be localized; more often, they are global. We need only look at the COVID-19 pandemic for a reminder of the upheaval supply chain disruptions can bring to the average business.

This guide explores the common causes of supply chain disruptions, the steps you can take to manage them, and how to mitigate the effects of the next global crisis on your supply chain.

Types and Impacts of Supply Chain Disruptions

A supply chain disruption is any sudden change that negatively impacts the network of people, organizations, and activities that move a product from a supplier to a final customer. Supply chain disruptions have either:

Supply chain disruptions are further characterized by their type, intensity, duration, and source. These disruptive events may have an individual impact (e.g., equipment breakdown, fire, etc.), a local impact (e.g., labor strike in New York, etc.), or a global impact, wherein all echelons of the global supply chain are affected. These included:

Though natural disasters and catastrophic events are considered low risk, their impact on supply chains can be far greater. Moderate impact disruptions are far more common. These include:

With the threat of so many potential disruptive events looming, the question of whether or not your business will experience a supply chain disruption is not a matter of if, but when.

Supply Chain Executives' Responsibilities

Supply chain disruptions are inevitable. Whether due to intensifying trade disputes, political upheavals, or high-cost natural disasters, threats to the supply chain have never been more numerous.

There has also never been a greater time to assess the threats to your supply chain, manage risks, and prepare for the next disruption. Unfortunately, many business practices take a reactive approach to disruptions. When they are hit by a sudden disruption, they build a temporary task force to manage the issue, which wastes a lot of precious time.

Leading companies with global supply chains (automotive OEMs, chemicals, and electronics companies, etc.) have permanent supply chain risk-management in place to:

Most importantly, the information cascade between the supply chain risk-management team and other company functions is well-established, with clearly defined interfaces and processes.

In other words, these companies avoid and manage future disruptions to supply chains by A) Taking a proactive approach to risk management and B) Investing the time and resources to prepare for risks.

WHO IS RESPONSIBLE FOR SUPPLY CHAIN RISK MANAGEMENT?

Like all business initiatives, supply chain resilience should be leading a theme for decision-makers and logistics leaders throughout the organization. These may include a variety of stakeholders within your company. Some of the job titles might include:

Consulting with these supply chain executives is always a good idea when designing supply chain resilience. Fortunately, improving resilience is now a leading theme for many companies with complex supply chains.

Eight Strategies to Build A Disruption-proof Supply Chain

To establish an effective risk management strategy, you need to tailor it based on your company's starting position. To determine your starting position, you first need to understand the three stages of supply chain disruption.

Strategy 1: Understanding the Stages of Supply Chain Disruption

To successfully recover from a supply chain disruption, you need to activate effective methods to detect the extent of the disruption, design/select a solution to tackle it, and finally deploy that solution.

In other words, the path to supply chain optimization and resilience follows a three-stage process of recovery, discovery, and resilience.

Recovery

In the world of supply chain management, recovery mode and survival mode are synonymous. This stage assumes that a supply chain disruption has already occurred, in which case the business will:

Discovery

Here is where you identify lessons learned and which areas are the most critical to running your supply chain.

It’s important to note that the discovery stage can only begin once the business has recovered enough from the disruption to A) Consider the tools and information you lacked during the disruption and B) Evaluate what you need to operate during the next disruption.

Resilience

Stage three of supply chain optimization and risk management is to systematically classify supply chain risks and develop a related response strategy for each. This stage can be broken into four parts. However, many businesses focus only on steps one and two. Advanced businesses focus a great deal of attention on steps three and four as well.

Resilience steps include:

In addition to these steps, you must also recognize shifts in consumer behavior and embrace emerging technologies that may improve your risk management capabilities in the future.

Strategy 2: Invest in Supply Chain Technology

True supply chain resilience comes from recognizing shifts (potential disruptions), assessing your business's ability to operate amid these shifts, and positioning your organization to thrive indefinitely.

Increasingly, technology is improving and enabling businesses to anticipate disruptions and reconfigure themselves to mitigate impacts across their entire supply chain. COVID-19 is the latest disruption to test the viability of risk management technologies that:

In light of the COVID-19 pandemic, the push to establish a systematic supply chain risk-management approach is more relevant. Tools like the Internet of Things (IoT), cloud computing, and 5G make it possible to create new data sources from the physical attributes of a supply chain. But no amount of technology can make up for a risk-aware culture among employees.

Strategy 3: Build a Flexible Culture

As supply chains become more complex, the impact of disruptions intensifies. Resilience, therefore, comes from incorporating new technologies and fostering readiness, contingency actions, and a data-driven culture among employees.

Beyond a business’s commitment to using real-time tools and actionable data, there needs to be disciplined decision-making. The better a business can combine data with judgment and analysis, the easier it will be to eliminate biases, defend decisions, and create a more resilient supply chain.

Strategy 4: Automate & Digitize Manual Processes

Data and automation can accelerate advancements in risk management for your supply chain and throughout your business. Both can help your company continuously monitor risk at scale, cost-effectively.

But before you can incorporate an automated risk-action model, it helps to have a clear vision of the end goal: shift away from manual processes so that teams can focus on the highest risk mitigation actions.

Fortunately, it's never been easier to become digitally resilient. Powerful wireless networks, mobile tech, and cloud-based software are critical safeguards against an emergency. But, more than that, digital transformation and automation offer year-round benefits by improving business operations, cutting out inefficiencies, and opening new revenue streams and markets.

Strategy 5: Cross-Functional Supply Chain Integration

If COVID-19 taught us anything, it's how sudden supply chain disruptions can bring seemingly stable processes to a halt, forcing businesses to reinvent those processes from the ground up.

The flexibility to sense imminent supply chain disruptions and pivot to meet rapidly changing conditions on the ground requires a new set of business capabilities. You need to:

These capabilities should leverage platforms that support and/or integrate with:

Fortunately, the process of integrating these platforms and capabilities into your supply chain is smoother and less costly than ever before.

Strategy 6: Manage and Drive Down Costs

When risk management protocols integrate into the supply chain and employee culture, the costs of running a supply chain during a disruption come down considerably. In fact, supply chains work best when there are robust cost controls on things like:

Given the importance of cash flow in times of supply chain disruption, you should immediately develop a plan for cash management as part of your overall business risk and continuity plans. But you should also diversify inventory and supply across multiple channels.

Strategy 7: Diversify Your Suppliers and Channels

COVID-19 and similar supply chain disruptions solidify the need for you to diversify your suppliers across all channels in which you have a presence. In doing so, you insulate your valuable supply of materials from the most significant impacts of a disruption.

But supplier diversification is more than a backup plan. True supply chain resilience calls for a full range of trusted suppliers evaluated against one another to ensure value during the next supply chain disruption.

Strategy 8: Use Predictive and Prescriptive Analytics

The best tools to evaluate suppliers (and risk of supply chain disruption) are predictive and prescriptive analytics, used to model, predict, and prepare for future changes in the supply chain.

Such insights drive continuous improvement initiatives that reduce waste, streamline processes, and minimize costs. Predictive and prescriptive analytics are useful in understanding what future demands are likely to be, while prescriptive analytics analyzes the potential impact on inventory levels based on specific demand-planning decisions - critical during a supply chain disruption.

Conclusion

The unpredictable nature of a crisis means that a supply chain disruption could hit your business or a critical supplier at any time. The fast-paced nature of e-commerce delivery and swiftly changing consumer behavior means you might not have time to react to the next disruption before customers take their business elsewhere.