Three areas to focus on when building supply chain resilience

Highlighted by the disruption of the coronavirus pandemic, the impact of Brexit and events such as the Suez Canal obstruction in March, supply chain resilience is now front of mind for businesses of all sizes.

Taking action now to build supply chain resilience could help businesses avoid unnecessary disruptions and costs, aid future growth and ultimately drive competitive advantage.

Here we outline three key strategic areas that businesses should focus on as a priority in order to achieve resilience across their supply chains.

Robust supply chain assessment

When it comes to something as mission critical as the supply chain, having a complete end-to-end view is key.

If businesses feel they haven’t currently got full clarity on how their supply chains operate, including potential opportunities and areas of weakness, the state of their supply base and how their logistics and distributions operations are running, it’s important to undertake a detailed review – and on a regular basis.

Assessments should be made through three lenses:

• Risk – While this is possibly the hardest area to assess well, good visibility of potential risks can help businesses avoid damage to both reputation and performance. Constructing a detailed model of the whole supply chain will allow businesses to conduct a sensitivity analysis based on ‘what if’ scenarios. These insights can be used to improve resilience and deliver efficiencies.
• Performance – Performance needs to be assessed to determine if the right balance between cost and value is being achieved across the supply chain. The costs of raw materials, energy and labour are volatile and have increased due to economic constraints and the huge growth in global demand for delivery services during the pandemic. In order to continue production and provide customers with good quality items at affordable prices, regular adjustments to the whole supply chain model may be required.
• Capability – Assessing capability requires a review of a business’s ability to respond to external factors quickly and effectively. That includes having the people and systems in place to react to issues such as spikes in demand, changes in raw material costs or natural disasters.

Building agility into the supply chain

There are many advantages to building flexibility and agility into the supply chain, from helping to drive top line growth, responding quickly to changes in market demand and many other structural and operational benefits.

One way to improve supply chain agility is using tools that allow for sophisticated demand planning and inventory management combined with a flexible operating model. This will enable businesses to deliver a speedy and reliable customer service, while minimising inventory and optimising efficiency.

It is also worth considering a multiple sourcing strategy. This approach allows businesses to switch rapidly between suppliers, ensuring a continuous flow of goods in the event of supply chain disruption.

Rapid decision making is vital. This requires a fully integrated supply chain, from customer to supplier, to share real-time demand signals and implement fast feedback loops.

Future proofing the supply chain

Ensuring that a business’s supply chain is ready for the future will help improve overall resilience.

Most businesses recognise that change will be necessary as we see new trends emerging. Some of these, such as the shift to digital, rise in online consumerism and growth of some Asian economies, have been expedited due to the pandemic. Others, such as the growing pressure to embrace sustainability, have been a long time coming.

For every business, change will take a different form, and it could be the products they make, the technologies and processes they use or other areas of their operations and supply chains that will need to adapt.

Future proofing supply chains on the way to a greener and more sustainable future will require a level of detail that many businesses won’t have previously considered. They will need to know exactly what’s happening across the whole supply chain and understand the environmental impact of each supplier’s operational activities.

Manufacturing sector demand is showing early signs of rebounding more quickly than expected in some areas, so it is important for businesses to start thinking about and actioning these changes now.

In our recent white paper, Supply Chain Resilience: The New Competitive Advantage, we dive deeper into the issues impacting supply chains, and provide insights on the steps businesses can take to build supply chain resilience and drive competitive advantage as a result.