The costs of supply chain disruptions vary based on the severity of the disruption, how quickly companies recover, and numerous other factors. According to Supply & Demand Chain Executive, supply chain disruptions resulted in costs of more than $56 billion in 2015, and five years later, that average is on track to more than double following the coronavirus crisis.
As companies look to diversify and mitigate future impacts of COVID-like crises, it comes as no surprise that digitization and its effect on supply chain resiliency and collaboration have risen to the top of C-suite executives radar, as almost half of C-suite execs say they will focus more on digital and tech investments once crisis eases, according to the EY Global Capital Confidence Barometer survey of more than 2,900 C-Suite executives. The study found that 41% of respondents were investing in automation at a faster clip in response to the crisis, with another 43% of business leaders saying they will speed up investments in digital and technology once some normality has returned.
Why disruptions are worse for those without digitized supply chains
Digitized supply chains are the superior option for any organization, and that was true long before the current disruption brought the global supply chain to a near standstill. Unfortunately, organizations without digitization or limited access to digital capabilities fare far worse than those with some digital improvements. Consider this example.
In the post COVID supply chain, drivers want a safer, healthier option than spending extra time in facilities. And, they want “contactless” paperwork. Well, the digital supply chain is the ideal way to tap that value by digitizing documents. Again, those without a digital capability are effectively putting their drivers at risk, incurring higher costs for the personal protective equipment (PPE) for staff, and risking access to fewer drivers. Ultimately, failure to digitize means responding with the most archaic and costly measures when supply chain disruptions occur.
Digital, resilient operations mitigate supply chain disruptions
Digital supply chains are naturally resilient. They enable continued work in areas with a lower impact from supply chain disruptions. Few areas of the supply chain are more susceptible than sourcing strategies. Without an adequate supply, the supply chain shuts down. Customers take their anger out on favored companies, and yet, they hope companies can refill the shelves. It’s the panic-buying effects that lead to dramatic impacts. Even for companies with U.S. manufacturing centers, the effects of disruption are not limited to China or any other entity.
In the global economy, manufacturers may source raw materials from affected regions. Even if the final product is assembled in the U.S., the raw materials may be out of reach or under lockdown. Take another example.
During hurricane season, building supplies grow in demand, especially in coastal regions. In turn, the prices of such items increase across the country and possibly the globe. The only hope of surviving and thriving lies in enabling effective risk management and achieving supply chain resiliency. Of course, a more diverse supply chain contains this protective effect—enabling multi-sourcing capabilities for all needed resources from cargo space to drivers and beyond.
How to increase resiliency to reduce disruption impact
In the best of circumstances, supply chains would already have a wide-ranging network. But, let’s be realistic. Suppliers tend to promise the world in exchange for a single-supplier contract. Think about it. If the company is your only supplier, they have more to gain. As further explained by the Harvard Business Review:
“Supply-chain managers know the risks of single sourcing, but they do it anyway in order to secure their supply or meet a cost target. Often, they have limited options to choose from, and increasingly those options are only in China.”
To enable digitized supply chains and increase resiliency to combat the effects of supply chain disruptions, supply chain leaders need an advantage. And, achieving that advantage begins with following these steps:
Stop trying to make real-time decisions based on outdated data. The only thing worse than not using data to make decisions is using outdated data. Outdated data may lead to higher costs and poor resiliency. Digitizing the supply chain should yield real-time data the technology then turns into actionable insights and analytics so supply chains may respond more proactively to disruptions.
Recognize that your tech stack is not living up to its promised value. The tech stack is another opportunity for improvement. Instead of trying to hop across systems to see multiple aspects of the supply chain, digitizing the supply chain should entail unifying your tech stack into a single source of truth.
Identify weaknesses contributing to limited real-time visibility in management. Lacking visibility to the real-time status of your supply chain results in an inability to respond. Instead, leaders need a way to intervene regardless of whether the current activity is under their control or not—such as freight already in transit or that is otherwise liable to another party.
Conduct supply chain disruptions’ scenario planning to prepare for the unexpected. Scenario planning goes a long way in reducing risks and helps to prepare for possible disruptions.
Enable rapid scalability by using centralized storage and management resources. Those functions serve an added benefit when applied to communications and sharing of data as well. They also eliminate the hassle of keeping paper-based records.
Streamline payment management processes to shorten the order-to-cash process and build rapport with partners. A faster payment clock attracts more supply chain partners, and when paired with easy onboarding processes, organizations achieve digitization much faster and enable resilience.
“Visibility and flexibility = resiliency. Visibility is the first step and then the ability to adjust modes on the fly allows for in transit shifts to be made. That’s where Port X Logistics, using Turvo, comes into play. Divert your cargo at Port, Transload, and expedite to the destination while having complete visibility on the Turvo Inc. app. All photos, docs, and locations available right on your smartphone.”
The ability to stay proactive and flexible, by digitizing their supply chain, allowed Port X Logistics to stay resilient in the face of any change or disruption, making sure they put the focus on what their customer needs to stay successful and get the desired outcomes they seek.
Harden resiliency, agility, and flexibility in your supply chain with a unified, collaborative supply chain infrastructure
The need for diversification and resiliency in the supply chain is absolute. According to Supply Chain Dive, most CFOs (56%) plan to find and procure new sourcing capabilities going forward from COVID-19. Meanwhile, 74% of supply chain professionals surveyed are not planning on moving sourcing out of China, so the best option is to expand. Turvo can help enable that expansion and create responsive, resilient supply chains regardless of what the future holds. Visit Turvo online to get started.
Adam Robinson is a Director of Product Marketing at Turvo. You can read the original article HERE.