Getting Ahead by Developing a Robust Supply Chain System

Getting Ahead by Developing a Robust Supply Chain System

Recent events such as the US-China trade war, Brexit, and the Covid-19 pandemic disrupted trade and supply chains globally. The Covid-19 pandemic had a significant negative impact on global markets and exposed supply chain problems across various industries. The supply chain’s network resilience has been stress tested and failed, exposing loopholes and bottlenecks in supply chains globally. The impact of the pandemic also served as a wake-up call for decision-makers, both in private and public institutions, to prepare for future disruptions.

Global trade and domestic supply chain structures have revealed many problems that may have been previously ignored. The over-reliance on certain vendors for specific products and services, or the inflexibility of supply chains to respond quickly to changes in demand patterns, exposed inadequacies that have plagued supply chains for a long time.

Reset and Enhance Supply Chains

The current events all call for a reset in the design of the supply chain networks to accommodate for flexibility and resilience. Businesses have learned that they cannot continue to focus on lowering costs and enhancing production efficiencies, without considering the resilience of their supply chains.

Shuler, A. (2021, January 7). Improving a Company’s Efficiency with Supply Chain Network Optimization. Retrieved from einvestingforbeginners.com: https://einvestingforbeginners.com/supply-chain-network-optimization-ansh/

There is a need for a united front and securing a reliable and robust supply chain. A robust supply chain network is one that can prepare for and quickly adjust to disruptive events and, further, continue to function even in the disruptive state. This means reacting to problems quickly without significantly impacting production efficiencies, and thus the bottom line. This article outlines crucial steps to follow in order to develop a robust supply chain.

Risk Assessment and Analysis

Mapping out the risks your business is exposed to, especially those generated by internal procurement practices, is an excellent first step to building a resilient supply chain. Mapping risks allows companies to plan ahead and put contingency measures in place. 

Implementing a thorough contingency plan and identifying vital components and suppliers are key pillars in building the foundation of a resilient supply chain. Going one step further and identifying tier 2 and tier 3 suppliers will help companies set up alternate routes for sourcing their products, thus consolidating their supply chain as they prepare for unforeseen events. A robust supply chain will avoid having a high dependence on a single vendor for sourcing a specific component. It will also identify geographies with increased geopolitical risk or geographies exposed to potential climatic catastrophes and have contingency plans in place well in advance.

Develop a Flexible Supply Chain

Companies need to design a supply chain that can quickly detect, respond to, and recover from any disruption. Having contingency measures in place will provide peace of mind and help create a robust supply chain.

Supply Chain Integration

Having a system that tracks the products from raw materials to finished goods will be imperative in managing your supply chain. It is also important to map out process flows and establish relationships with your suppliers. Creating and running scenarios can help companies visualize the impact that certain unforeseen events could have on their supply chains. Companies can also use the data collected to plan and evaluate how to improve the system for rapid disruption detection, response, and recovery.

Source: Robust Global Supply Chain Model

Developing A more robust approach to global supply chain Information systems in a Turbulent World by M. Laeeq Khan (2011)

Diversified Sourcing from Offshore and Near-shore Suppliers

Increasing the ability to supply a spike in the demand whenever there are disruptions will ensure business operations do not stop. Ensuring business continuity will place the company at a competitive advantage and put it in a position where it can handle risks.

Collaboration of Stakeholders in the Supply Chain

Develop relationships across the supply chain to share best practices and strategies with the companies you collaborate with. Strong relationships will often lead to better time management, clarity in what is happening, cost-effectiveness, and even increased transparency. This will ensure that no information is withheld from any party, promoting open collaboration and communication.

Demand Planning, Supply Planning and Inventory Optimization

An effective system that can do supply planning, demand planning and inventory planning at the same time, while also helping all stakeholders visualize relevant data in real time is key to developing a robust, data driven supply chain. Users can make inferences about past data, visualize and interpret present data, and run scenarios and algorithms to plan for the future. The Covid-19 pandemic wreaked havoc across the world. Data accumulated before the pandemic may not be relevant anymore, since lead times have increased significantly and the cost of moving products has also increased tenfold. In order to avoid all kinds of shortfalls going forward, companies need to have access to all their relevant data in one place and then develop contingency plans to be as best prepared as possible for future market disruptions. At the same time, setting up alternate sourcing routes and alternate suppliers for as many components as possible has now become more important than ever. That is why, it is just as important to have the means of communicating effectively with all stakeholders, on the same platform, as it is to have access to all your data in one place and plan ahead. 

Conclusion

The raw materials shortage in the automobile industry is just a recent example of the setbacks manufacturers can face because of supply chain disruptions that affect their operations. It is now more important than ever to plan ahead by implementing an efficient supply chain digital platform to give you great visibility and transparency into your data in order to develop a robust and resilient supply chain. However, companies should understand that they also need to collaborate effectively with their suppliers, customers and partners in order to thrive. Yes, future black swan events can cause disruptions, but businesses need to make sure they plan for what they can control.