Supply Network Resiliency: What It Is, and How to Achieve It
Many supply chain professionals will probably agree that supply chain disruptions have intensified over the past few decades, and even more so as a result of the pandemic.
As trade has become more globalized, supply chain networks are exposed to a variety of political, environmental, and technological vulnerabilities.
From extreme floods that swamp microchip factories to protectionist policies that disrupt international trade, today’s supply chain managers are challenged with mitigating these risks while delivering value to customers in record time.
While there’s no one-size-fits-all solution to all of these problems, adopting a set of measures can help make your firm more resilient and help you power through disruptions.
Your firm might deploy AI-based analytics software to track real or potential supply chain disruptions in real-time. Or you might increase the number of suppliers and manufacturers you work with to diversify risk.
Building supply network resiliency can help you to keep operations running in the midst of uncertainty. It could even help you predict customer demand and supply shortages, allowing you to respond weeks, if not months, in advance.
What is supply network resiliency?
Any firm with supply network resiliency likely has a greater ability to confront unforeseen risks in its supply chain with confidence. Oftentimes, they may be able to react to disruptions quickly and even gain a competitive edge over their competitors, who are left scrambling for solutions to the crises.
Having a resilient supply chain may allow your firm to gain transparent oversight over all of your suppliers, manufacturers, retail outlets, and customers. This oversight in turn may help you to identify the most robust inventory management approach to use to meet your customers’ demand.
Instead of just employing a traditional “just-in-time” approach, you can constantly be identifying new and existing risks to your supply chain and adjusting your processes accordingly to deliver products and services on time.
What makes a supply network resilient?
A resilient supply network is designed to help you forecast, anticipate and respond to any disruptions or opportunities that appear in your supply chain.
It’s usually made up of systems, sensors, blockchain and Industry 4.0 tools that are powered by AI, machine learning and online databases.
These components usually work together to scour open-source data, such as competitor activity and traffic reports, to bring you crucial real-time insights that can be used to keep disruptions to a minimum. Supply chain managers can use these systems to keep track of partnerships and supplier contracts in the most distant areas of their network.
Moreover, these analytical tools can enable you to access your inventory virtually and approve on-demand manufacturing requests remotely. In other words, they can help make your supply chain more productive and responsive to change.
The biggest threats to supply network resiliency
While supply network resiliency has helped several firms manage risk successfully, it’s not without its vulnerabilities.
The analytical systems and tools that give supply networks their resiliency are relatively new technologies that have yet to be tested for all risk scenarios and attacks.
Failure to predict future events
Profound shocks such as financial crises, pandemics, cyberattacks, environmental disasters, and trade disputes can be anticipated by these tools to a certain extent.
But some events may appear suddenly – and in these cases it may be only in retrospect that these tools can be adjusted, to help firms prepare for similar shocks if they recur.
Take the COVID-19 pandemic, for example. Before the virus spread across the world, it had been making headlines in China and most of Asia. Supply chain analytics systems and tools may have picked it up as a threat but without a similar event in living memory, they may have not been able to calculate the full impact it would have on global supply chain networks.
The COVID-19 experience and other smaller disruptions have motivated many business leaders to increase their supply network resiliency – and quickly.
According to the McKinsey Global Institute, disruptions like the ones mentioned above have the potential to erase about 40 percent of a company’s annual profits over the course of a decade. Another study found that firms were experiencing material disruptions lasting a month or more every 3.7 years on average. These findings make it imperative for firms to think of resilient supply chains as necessities for their continued success.
Poor communication within your systems
Even with great data, it can be difficult to optimize your supply chain without systems that communicate well and allow you insight into the bigger picture.
At Verusen, we aim to solve this issue by providing transparency into the supply chain from start to finish. Our materials management intelligence platform takes data to the next level by breaking down the complex relationships between different systems, parties, and data points.
How to increase your supply network resiliency
With adequate planning, your firm can increase its supply network resiliency gradually.
Some improvements may require you to overhaul your existing procurement processes, which can be difficult (and prone to some resistance within your organization) at the beginning, but once achieved can bring your firm long-term benefits and profits.
Here are 6 ways to make your supply chain more resilient.
1. Keep your buffer capacity high
Keeping your buffer capacity high was once considered a costly and wasteful measure, especially among proponents of lean supply chain practices, but it’s now making a comeback.
The measure’s renewed popularity can be attributed to the flexibility it afforded supply chain managers in the face of fluctuating demand and unreliable supply during previous trade disputes. Though expensive, it has helped firms to ship products to customers faster and to operate with less uncertainty.
To keep buffer capacity high, a firm may decide to hold extra inventory, maintain a larger network of suppliers, or to pay for extra workers, warehouses, and redundant stock. Other firms may choose to find alternative factories and duplicate suppliers to keep their production lines running in anticipation of surge demand during new product launches.
2. Make your networks diverse
With the threat of political disputes and environmental disasters looming over us, it might be a good idea to diversify your supply chain networks.
In general, the more diverse your networks are, the greater the chances are that they’ll be able to deliver on your requests in the midst of a crisis.
You could start by making them more diverse both geographically and in size. Aim to find suppliers that are closer to home, reducing lead times, in addition to cheaper suppliers located in places where wages may be lower. Having suppliers spread out across the planet also reduces the risk that a flood or an environmental disaster in one location will shut down your entire operation.
Also, mixing up your networks to include innovative SMEs alongside more traditional enterprise-level suppliers can be a great way to diversify. While larger suppliers may have wider global reach and stronger financial standings, smaller companies may compensate with speed and a higher quality of service.
3. Don’t rely on one source for your supply
You may remember the 2011 flood in Thailand that disrupted the world’s supply of semiconductors, camera lenses, and car parts.
For nearly 6 months, automakers and camera manufacturers were unable to meet their sales targets. Since then, supply chain experts have warned against relying too heavily on single sources of supply.
One great way to protect yourself against this risk is to have a multisourcing strategy in place. Make an audit of your existing supplier(s) and the amount of revenue you could lose if each one of them had to unexpectedly shut down because of a disruption. This exercise can help you see the risks they pose to your organization and identify the characteristics of new suppliers you want to work with.
4. Nearshoring can keep supply cycles short
Besides multisourcing, finding suppliers closer to you can help you manufacture and deliver products to your customer faster than your competitors do.
Doing so can shave weeks off cycle times which can work to your advantage at a time when customers expect goods to arrive within 1-3 days.
You’re also likely to have greater control over inventory – in some cases, you might even be able to conduct regular quality control checks to make sure that your suppliers are generating the items you need as per your requirements.
5. Build an ecosystem of partners
Another way to make your supply network more resilient is to build an ecosystem of partners from several different technical domains.
You can strive to develop relationships with relevant organizations beyond your immediate group of suppliers, logistics providers, and factories.
These other organizations may include public research institutions, analytics firms and policy institutes, to name a few, that track trends in the supply chain industry. Their insights may help you rethink your current supply chain strategy and even alert you to current practices that are preventing your supply networks from becoming resilient.
6. Use a networked, harmonized system
With the aid of interconnected machines and smart tools, creating a networked, harmonized system has never been easier.
You can use them to digitize most of your operations, such as by attaching radio-frequency identification (RFID) tags to track goods from end to end. This can help you monitor your entire supply chain, connect partners with one another, and collaborate seamlessly across the supply chain.
You could also harmonize your supply chain by standardizing components across multiple products. Automakers have practiced this for decades by using the same chassis for different models, thereby creating efficiency and flexibility in their operations.
The right supply chain platform can keep your network resilient
A resilient supply network can mean the difference between success and failure in the face of a disruption.
With Verusen’s purpose-built AI-driven platform, you can make your network more resilient in just a matter of months. Our platform eliminates operational guesswork and turns your data into easy, actionable insights for all users across procurement, sourcing and operations.
We help you gain visibility over your entire supply network without the need for consultants, helping you to make significant savings by reducing operational risks. Try Verusen today to make your supply chain more resilient.