Supply chain disruption: 10 tips for improving resilience

The Amazon Effect refers to the ever-increasing consumer demand for same-day and next-day delivery speeds. A 2021 survey from Digital Commerce 360 reports a 12% rise – from 2020 to 2021 – in requests for next-day delivery from both online and omnichannel retailers. In fact, the trend in delivery speed demands is such that many consumers are beginning to judge fulfilment times in hours rather than days. Furthermore, digital supply chain technologies, shorter product life cycles, and more customisable goods and services are only adding to the competitive demand for speed and agility.

Supply chain optimisation procedures will need to be about more than simply cost reduction. The truly resilient supply chain procedures of the future will need to be agile, elastic, and predictive – from design and manufacturing to enhanced customer experiences. Competition has never been fiercer so legacy systems and processes that can take months to adapt to new business or production models cannot support today’s demands.

Tip 4: Reduce dependency and supplier risk.

Roughly 80% of supply chain disruptions originate with lower-tier suppliers, particularly when geographical distance adds to a lack of visibility. Supply chain managers are fully aware of these risks and have long wanted to mitigate them, but the old-school systems and operational processes they have in place have made it unrealistic to do so. Of course, businesses need to be able to count on their suppliers to deliver consistent pricing and reliable volumes, but that’s only part of the risk management picture. Supply chain managers need to have complete confidence as to the provenance of the goods in their supply chain – from raw materials sourcing and handling to the ethics and workplace practices of their suppliers. 

Food Safety Magazine tells us that the average cost of a food recall for a national brand is about US$10 million. And that’s just for the logistics and manpower of the recall itself, to say nothing of the lasting brand damage. Cloud-based supply chain and integrated business processing tools are capable of connecting a network of suppliers in real time. This means that not only are connected supply chains more transparent, but they also allow businesses to build a more diverse network of suppliers – so if one fails, they have others to fall back on quickly.

Tip 5: Optimise your inventory management.

A fundamental challenge for every supply chain manager is balancing shortage and surplus. In the past, this has been a largely backward-looking task where analysts try to assess past market and customer activities to predict an optimal inventory balance. And in times of disruption and volatility, this retrospective approach is particularly risky, as Gartner’s research vice president Alex Linden points out in a 2021 WSJ article: “The problem in highly volatile times is that sales data of last week is not a good predictor of sales in the following week… This is literally the definition of volatility.”

Today, businesses have access to real-time and predictive data analytics to help build more accurate forecasts and supply chain visibility. Many businesses have demand forecasting specialists on their teams whose instincts and experience are invaluable. Demand forecasting and inventory optimisation technologies that employ artificial intelligence (AI), machine learning, and advanced analytics are able to augment the talents and skills of those specialised professionals. Add a strong planning and communication strategy and businesses have the potential to be further ahead on inventory management than at any time in supply chain history.

Tip 6: “Design everywhere, produce everywhere.”

Reliance upon one or two (often offshore) sources for design and production contributes to supply chain vulnerability. A key step in the transformation to a more resilient supply chain is to leverage smart technologies like AI, machine learning, and advanced analytics to help you coordinate a domestic and global network of design and production partners – rather than depending upon the traditional linear model of relying upon one or two fixed partners. On-demand elasticity in design and production functions not only reduces risk and vulnerability in supply chains, it also allows businesses to cast a wider net across a growing network of talented designers and producers. And those benefits are passed along to satisfied customers in the form of more competitive and customisable products and fresh, inventive designs.

Tip 7: Nearshoring manages supply chain disruptions. 

Many long-established supply chains rely upon supply and manufacturing partners in countries like India and China – and have strong and long-standing relationships with them. But political, economic, and environmental factors are making those relationships harder to sustain.

Historically, the economic disparity between countries like the U.S. and China has meant that it simply wasn’t feasible to compete using domestic sourcing and manufacturing. The challenge has been to find ways to narrow the cost margins just enough to make nearshoring realistic. With the use of smart supply chain technologies, businesses can more efficiently and precisely estimate their manufacturing needs, use Internet of Things (IoT) solutions to optimise machines and assets, and significantly reduce waste. Other innovations like on-demand 3D printing can help reduce costs with “virtual inventories.” And access to flexible product design and manufacturing networks can further increase the feasibility of nearshoring many significant lower-tier supply chain functions.

Tip 8: Make elastic logistics work for you.

Transportation management and logistics have been the backbone of every supply chain for thousands of years – as well as one of its greatest expenses and vulnerabilities. Alexander the Great is reported to have said, “My logisticians are a humorless lot. They know they are the first ones I will slay if my campaign fails.” Traditional logistics operations are costly and limited as they are typically comprised of a company-owned fleet and/or fixed contracts with one or more third-party logistics providers. Elastic logistics refers to an on-demand logistics network that can stretch and shrink as required. You can look at it like a ride-share company where there are lots of shipping and last-mile logistics resources available in real time, when you need them – but not sitting there idle and costing you money when you don’t.

Tip 9: Supply chain planning is fundamental. 

Every supply chain is comprised of crucial yet all-too-often siloed functions such as sales and operations planning (S&OP), forecasting and demand, response and supply, demand-driven replenishment, and inventory planning. Cloud connectivity, smart technologies, and solid supply chain planning strategies can integrate these functions to help analyse and leverage data and insights from across the business. The goal-setting and self-auditing processes in the “early preparation stage” above can help build a culture of better communication and responsiveness across your entire supply chain. And software solutions that integrate these business planning functions are at the heart of today’s supply chain agility and resilience. Technologies like AI, machine learning, advanced analytics, and IoT all come together to deliver supply chain planning capabilities that are powerful and fast.

Tip 10: Supply chain optimisation starts with a single step. 

Although it can seem like a daunting task to optimise often decades-old supply chain operations, it doesn’t have to happen all at once. Every step you take toward a more strategic and visible supply chain makes you that much more resilient. A good start can simply be to map all the people and functions in your supply chain from end-to-end. Get those team leaders talking to each other. Learn firsthand where the most fixable problems are and where the lowest-hanging fruit is for quick and easy wins to jump-start your supply chain transformation.