Resiliency is generally defined as the ability to recover from a threat or unanticipated change. As the term applies to supply chain management, resiliency is most often measured by the time that’s required to return to the prior level of operational efficiency after a disruption has occurred. Supply chain resiliency can also refer to the ongoing ability to avoid or mitigate a disruption. Most companies need to increase their ability to achieve both goals.
Building resiliency is always a challenge in supply chain management. For decades, companies have sought to reduce costs and become leaner in their supply chain management practices; but with the drive for greater efficiency comes risk. From increasing weather-related disruptions and natural disasters to rising geopolitical tensions, threats to the supply chain are increasing. Globalization of supply networks has also added a level of complexity and risk. These threats are costly and challenge a company’s ability to maintain and strengthen resilience.
Here are some ways your company can make supply chain resilience a priority:
Create a Proactive Plan
Supply chain risk management and resilience are directly related. The depth and relevance of your company’s risk management plan is a key indicator of how resilient its supply chain will be. Having thorough risk management practices puts your company in a more agile position to manage a disruption. Your plan should address risk at every layer of the supply chain, and be monitoring the plan frequently, to identify and assess potential vulnerabilities.
Adopt Digital Tools
Your company’s digital tool kit should not only collect relevant data; it most also identify key trends, as well as potential risks. For example, you will need to anticipate and plan for the potential for an environmental issue at a supplier’s location.
Expect the Unexpected
The pandemic has forced companies to refocus on the impact of unexpected events, both large and small. Labor shortages, demand fluctuations, shipping constraints and increased transportation costs have caused major disruptions in supply chains. Your company would be well-served to view unanticipated disruptions as a normal part of doing business, and plan accordingly.
Communicate with Partners
Before, during and after a disruption, collaboration and communication with suppliers is essential. Frequent communication and tight integration of systems with suppliers and partners in the supply chain should be an ongoing priority.
Learn from the Boy Scouts. Safety stock and inventory buffers can reduce potential back-order constraints. Diversifying suppliers, or selecting and validating multiple components, adds redundancy and provides supply chain flexibility.
Compiling and evaluating data that demonstrates how risk management measures strengthened the supply chain during a disruption will help validate “lessons learned,” and foster a higher level of resiliency. Many companies maintain an internal supply chain management council that routinely evaluates data and risks.
Reducing the time that a threat disrupts your supply chain is a critical business objective. You can reduce the duration and severity of disruptions by following best practices like these, that are designed to increase supply chain resiliency.