What does being a Resilient Supply Chain imply?

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Nowadays, many worldwide geopolitical events are disrupting the Economy, Health, Education, and as a consequence, the lives of people. Most recently, The pandemic has significantly altered the priorities of many industries.

In modern-global economies with SCs interconnecting several countries continuously, single events can generate large-scale disruptions, affecting businesses’ ability to meet formerly-made agreements, customers’ needs, at the lowest possible cost to all stakeholders.

According to a recent Gartner’s survey, only 21% of respondents stated that they have a high-resilient network.; others assure it is the only way out, suggesting that increasing resilience must be a priority. The principles of resilient SCs are the ability to return rapidly to the initial stage or to an improved one after disturbances or failure events to mitigate market vulnerability occurrence. Becoming more resilient is imperative in these critical circumstances.

However, leveraging efficiency and Resilience would not be so convenient when actions like safety stock, alternative sources or suppliers, multiple locations, or operating a more resilient SC are “the new norm,” but too costly; doing nothing could be catastrophic.

Being a resilient SC implies:

·       To re-design management, products, and services.

·       Flexibility to shift sourcing, manufacturing, and distribution activities reasonably rapidly.

·       The need for collaborative networks to act together to control, manage, and improve the flow of products, services, and data, from the source to the delivery point, the end-customers.

·       To enhance Agility or a rapid response to the crisis.

·       To build up a Risk Management culture to forecasting, analysing, and acting accordingly to make the best decisions to face the crisis.

·       To identify customers’ demand patterns and increase awareness of changing shopping standards.

Six significant strategies to build greater Resilience, according to GARTNER

·       Inventory and capacity buffers – Buffers enhance Resilience, both of underused production facilities or excessive inventory of safety-stock requirements. Use buffers to new-product launches or expansions. However, keep in mind that buffers are expensive, and it would be necessary to convince the C-suite to invest in them.

·       Manufacturing network diversification – Diversifying sourcing or manufacturing locations, switching new suppliers out of complicated countries, expanding to new developing regions, asking existing partners to supply them from elsewhere (in Asia or countries like Mexico) which represent strategical manufacturing accordingly to new-to-the-market needs.

·       Multisourcing – Several disrupted SCs crosswise revealed organisations’ dependence on a particular source of supply. For instance, in the field of the automotive industry, companies could not deliver finished-cars to customers due to lacking components. They concluded that multisourcing would diminish this risky probability.

To re-design a multisourcing strategy, leaders must deeply understand their suppliers’ networks to classify suppliers, both by cost and income effects, if a disrupting episode takes place. Leaders applying a diversified approach can succeed when handing business to other suppliers or running work with current one-and-only source supplier capable of producing and supplying at different locations.

·       Nearshoring – The manufacturing geographic-dependence on global networks and shorter cycle-time for finished-products made leaders consider regional or local SCs; however, these options could be costlier because they encompass numerous players and bring complications to the ecosystem. These approaches drive better control of the inventory, whilst relocating the goods nearer to the end-consumer.

·       The platform, product and plant harmonisation – Regionalising the network will bring a more synchronised plant technology and the product will move more effortlessly-harmonised throughout the network.

Standardising components across multiple items — above all, those not visible or essential to customers — is a different practice of harmonisation. It makes more straightforward sourcing policies and set up opportunities to locate higher volumes among several suppliers, which at a time, will enrich resilient culture.

·       Ecosystem partnerships – The crisis has evidenced the need to count on a diversified approach for sourcing. The collaboration among strategic-raw-material suppliers and external-service partners is crucial to make sure development readiness and Resilience for coming years.

For those organisations not able enough to maintain several locations on their own, robust interconnections with contract manufacturers and worldwide 3PLs are vital in expanding production and allocating it to diverse countries.

Conclusions: Gartner’s survey reveals that almost half of SC businesses are working with external manufacturers. They are studying how to keep on, relocating their products whilst supporting Logistics committed-partners with a common target.

What does being a Resilient Supply Chain mean for you?

Photo credit: Pavel Kalenik / Unsplash