What is Supply Chain Resilience?
Resilience in the supply chain is the capability of a supply chain and, by extension, the enterprise, to weather disruptions and reduce the impact of such disturbances on its costs, bottom line and customers.
A resilient supply chain can react quickly to geopolitical, economic and technological changes in addition to risks such as wars and pandemics to gain a competitive advantage.
What are the Benefits of a Resilient Supply Chain?
A core component of an enterprise's success has always been the ability to bounce back from disruptions.
A resilient supply chain helps an enterprise identify risks and reduce their impact without affecting the revenues or operations. Sometimes, businesses can turn such disruptions into opportunities by adopting resilient supply chain management and processes.
Businesses can gain market share at the expense of their competition and improve customer retention and relationships, leading to improved reputation, brand image and overall revenues.
Strategies for Building a Resilient Supply Chain
Creating a resilient supply chain is the only way to survive in a world rife with disruptions, but transforming supply chains to make them more resilient comes with its own challenges.
Supply chain resilience means having good visibility and the agility to switch sourcing locations or suppliers, relocate production and warehouse facilities and quickly move from Just-in-time to Just-in-case.
That means a shift in mindset – from a lean supply chain principle that advocated efficient processes for lowering costs for decades to a resilient supply chain that encourages redundancies to achieve a competitive advantage. It isn't easy; however, not changing may cost the enterprise even more.
Here are nine strategies that enterprises may adopt for a more resilient supply chain:
1. Holding a Buffer Stock and Spare Manufacturing Capacity
Holding additional inventory and underused manufacturing capacity is one of the strategies that could be easily implemented to achieve resilience, although doing so is expensive. Another strategic option for creating extra capacity is contract manufacturing.
2. Diversify Sourcing or Production Base
Expanding the supplier base and manufacturing facilities to different locations and countries helps reduce risks. Businesses could also consider working with a single supplier and having manufacturing facilities at multiple locations. Implementing these strategies is difficult, as it requires time and money to make the necessary changes.
3. Adopt Regional/Local Sourcing (Nearshoring)
Businesses should develop local suppliers to source their requirements. These can complement the supplies received from overseas. In times of need, additional supplies may be procured from the local supplier to augment the loss from overseas. This strategy also enables better control and helps shorten lead times in bringing products to the market.
4. Standardize Parts Across Products Wherever Possible
This is probably the cheapest strategy to implement due to its scalability and flexibility. Standardizing parts across a business' product line simplifies the ordering process, enables efficient inventory control and creates the requirement for multiple suppliers to handle the higher volumes.
5. Adopt Dynamic Pricing and Promotions
Change the pricing of the product and launch promotions to influence its demand.
6. Make Supply Chain Network Design a Core Business Process
With the help of supply chain network design, enterprises can build supply chain resilience models that help make the supply chain more flexible and agile. Such models help companies spot and mitigate risks across the supply chain.
7. Invest in an Integrated, Unified End-to-End Supply Chain Software Solution
This provides complete end-to-end visibility and offers a collaborative platform. One of the advantages of digitalizing the supply chain is gaining complete visibility and control over the supply chain, which reduces risks substantially and makes the supply chain more agile.
8. Implement Convergence Between Supply Chain Functions
One of the most significant issues that negatively impact resilience is the disarray in processes, information flows and technology that creates avoidable risks and productivity loss. Convergence of processes, information flows, disparate systems, supply chains and extended ecosystems is necessary to build true resilience in supply chains.
9. Establish Collaboration With Suppliers and Partners
Collaboration is one of the essential features, along with visibility and real-time intelligence, that enterprises look for in today's supply chain software. Businesses must collaborate with their suppliers and partners to effectively manage exceptions, mitigate risks and resolve issues to achieve resilience and efficiency.
What are the Three Roadblocks to Supply Chain Resilience?
Change per se is not difficult; it is the resistance to change that makes it difficult. Changing the mindset of the leadership team is imperative if a change is to be initiated throughout the organization.
Here are the three roadblocks to a resilient supply chain:
1. Considering Resilience to be Only a Supply Chain Function's Problem
"The first hindrance is the tendency to think of resilience as just a supply chain problem, says Mike Jette, Vice President of Consulting at GEP, in a recent podcast interview with Bob Bowman, Editor-in-Chief of SupplyChainBrain, titled How to Stop Talking About Resilience — and Do Something About it. Instead, the whole organization must get involved to achieve resilience.
2. Considering Resilience to Be an Internal Issue
To achieve true resilience, enterprises must look beyond themselves. Businesses must consider their working relationship with all their partners, direct and indirect, and multitier suppliers.
3. Lack of Collaboration with All Stakeholders
In a 2021 American Productivity & Quality Center survey, 40% of those surveyed considered a lack of collaboration across functions and with external partners as an impediment to improving supply chain processes. The lack of data or information sharing by businesses and partners enables risks that remain hidden until it is too late.
Supply Chain Resilience Example
GEP partnered with a grocery company producing fresh fruits in Spain to improve its supply chain resilience.
GEP advised the company to diversify some of its production from its current North Africa and Mediterranean facilities to Western Europe due to geopolitical and climate factors. This move, GEP Vice President of Consulting David Doran says, is "not necessarily 'nearshoring, but a reshoring of some of their production chain."
Enterprises must reexamine their processes and workflows to stay relevant when a state of flux exists and is expected to continue for the foreseeable future.
By rapidly transforming their supply chains, enterprises can leverage the latest technologies to break down organizational silos and enable end-to-end supply chain visibility through real-time information sharing and collaboration to achieve efficiency and resilience to disruptions.