Ever since the coronavirus pandemic turned the world upside down, the strive for „supply chain resilience” has seemingly dominated discussions in the logistics industry. Covid-19 affected global supply chains in an unprecedented manner, reminding logistics bosses all over the world about the true value of supply chain resilience.
The question on most people’s lips in 2020 is nonetheless how this resilience can be achieved. Fortunately, there is a wealth of astute commentary on this very topic, which is why we have compiled this list of 7 insights from established experts in the field of business and logistics.
Digitise, share data with suppliers and secure data privacy – fast
Like many experts in the field of logistics and supply chains, Liao and Fan believe digitisation to be a key factor in building supply chain resilience.
The authors point out that many companies have been put off by the cost of digitisation. However, they argue that implementing digitisation „is not simply a matter of cost, but primarily of visibility and managing supply chain risk.” Therefore, in order to restrict the impact of failures at different points in the chain, they believe it is crucial to make data available digitally.
When it comes to data sharing, Liao and Fan state that centralised chain systems cannot provide independent and auditable access controls to each party. This means that the best approach is to use a decentralized system owned by a large buyer, as it offers suppliers the required privacy while providing buyers with the visibility they crave. Blockchain, it is said, provides the means to create such a system.
Liao and Fan also point towards blockchain as way suppliers can share their data effectively. In their view, the technology can ensure that data regarding performance and risk, key to all supply chain finance transactions, „can be shared in an authenticated manner with financiers and other parties to a transaction, even when there is no direct relationship between them.”
Last but not least, the the World Economic Forum authors warn that logistics firms will need to get their skates on. The world economy is going through shock after shock, meaning the sooner resilience is built into your supply chain, the better.
Understand data, manage compliance, mitigate and monitor risk, stay nimble, assess suppliers consistently, and train vigorously
The six points listed above represent the best ways to achieve resilience according to Deloitte.
In the article linked above, Deloitte underlines how executives can use data analytics to analyse information effectively and better anticipate future problems. For example, Deloitte suggests that companies can benefit from pulling data from internal sources, external bodies, and even from social media.
In the second point, managing compliance, Deloitte’s Glenn Yauch highlights the value of ensuring staff are aware of the rules and regulations. As he says, “A lot of times, businesses don’t even know what they’re supposed to comply with. That’s a recipe for disaster.”
Mitigating and monitoring risk is also considered important with regards to building resilience. With that in mind, Yauch recommends companies identify what their real risks are. Following this, processes need to be radically changed so as to both manage and mitigate risks.
Another point highlighted in the article is that as many as one in five „have experienced a complete third-party failure or an incident with major consequences.” The lesson to learn from this is the importance of being nimble – to be able to have contingency plans and backup suppliers in place.
For the fifth item on the list, assessing suppliers consistently, Deloitte’s John Brown offers a useful tip. He argues that whenever a parties need to increase business from a supply-chain partner, or if that partner runs into trouble, it makes sense to assess the risks of that supplier again.
Finally, Deloitte believe that supply chain networks can maintain their state-of-the-art status by developing a „standardized education protocol” that engages academia and incorporates uniform supply chain management training.
Digitise and build a database of alternative suppliers
In article for Forbes, Kweilin Ellingrud of McKinsey Global Institute cites the example of Toyota building a supplier database following the Tsunami that hit Japan in 2011. This move allowed the company to minimise disruptions significantly when earthquakes occurred in 2016 and 2019. Therefore, the example shows just how companies can profit by investing time and money in creating an extensive supplier database.
Like many others on our list, Ellingrud stresses the difference that digitisation can make to supply chain resilience. In her view, one of the most significant advantages of digital technology is its „ability to monitor, connect, and collaborate across the supply chain.” This is of course due to the fact that failures frequently occur several tiers deep in supply chain.
Use a networked ecosystem, invest in capabilities, and develop an agile crisis management framework
EY’s Glenn Steinberg writes that the next-generation of supply chains will use a networked ecosystem that incorporates „suppliers, partners, manufacturers, distributors and retailers”, all of whom will be able to tap into the cloud to make calls based on real-time data.
In order to improve one’s supply chain resilience strategy, Steinberg also recommends investing in the following areas:
- Visibility and monitoring
- Adoption of alternative bill of materials or different ways to make a product
- Alternative supplier sourcing strategies
- Embedded network flexibility – either through owning inhouse or outsourcing manufacturing capabilities
- Standardized planning processes in shared service centers to flex where work is performed
- Technologies such as AI/analytics, control towers and digital twins
- Systems to identify environmental risks and supplier sustainability compliance
Finally, Steinberg argues that creating an agile crisis management framework would put companies in a better position to deal with a crisis – much more so than by using conventional, predefined plans. However, in order for the framework to function properly, Steinberg believes it should have governance procedures, a desired operating model and a standardised way of working.
Apply risk management principles and invest in monitoring of global suppliers
Right at the start of the coronavirus crisis in Europe, The Harvard Business Review warned of the need for better risk management and supply chain resilience.
In the article linked above, Linton and Vakil point out that many companies may be regretting their decision to risk single-sourcing despite knowing the dangers associated with it. Therefore, in order to build resilience, Linton and Vakil argue that risk management principles need to apply to tiers 1 and 2 in supply chains. Should it turn out that single-sourcing is the only option, the duo write that companies must support their traditional sourcing practices with new data sources and new methods of calculating the risk they take.
In addition, the authors urge companies to invest in 24/7 monitoring of their global suppliers – equating being without one to driving without insurance. In their view, it is simply not possible to „run a globally dispersed supply chain in today’s fast-changing world without being in the know about everyday news that could cause disruptions in the coming days.”
Establish a crisis management team, implement extensive digitisation, and establish a „central source of truth”
In a piece for entrepreneur.com, Elementum CEO Nader Mikhail stresses 3 fundamentals for making supply chains resilient; forming a crisis management team, extensive digitisation, and establishing a „central source of truth”.
Mikhail argues that the crisis management team’s imperative is to work together effectively to produce a „response playbook”, and to get hold of the required tech that can provide insight and transparency across operations.
Moreover, Mikhail is another proponent of digitisation, arguing it should be implemented in „as many operational processes as possible”. He highlights the example of how e-signatures can be used when physical contact is not possible, and explains how digitisation can untap huge amounts of data in real-time. This in turn can be used by business leaders to make big decisions about production.
Finally, Mikhail invisions how a centralised incident management system can act as a „central source of truth” by providing clarity on who is responsible for what in large organisations. Such a system, according to Mikhail, not only means problems can be identified and remedied faster, but also guarantees all those participating in the decision-making process have the same access to the latest updates.
Use the cloud to overcome supply chain resilience problems
Writing for Supply Chain Brain, Rod Johnson argues that the cloud is key to achieving supply chain resilience.
In his eyes, the path to resilience is via „networked, cloud-based solutions for supply chains that provide the connectivity between organizations that modern, fast-based commerce demands.”
The main advantage of a networked supply chain, Johnson says, is that it allows proactive rather than reactive decisions to be taken throughout the system, thereby preventing stoppages to supply and boosting efficiency. By using a live network, the system can evaluate delays from numerous perspectives and work out the primary cause. On top of that, Johnson believes cloud systems can be used to consider many variables along the supply chain, thus avoiding the amplification of bad data.
Johnson’s cloud solution is also a means by which the „Bullwhip effect” – which occurs when communication bottlenecks result in understocked retailers becoming oversupplied after a sudden spike in demand – can be resolved.
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