For supply chain managers, the COVID-19 situation has served as a wake-up call. Companies have been focusing on minimizing redundancy in sourcing for years in order to lower fixed costs and increase efficiency. Greater efficiency, on the other hand, comes at the sacrifice of flexibility and effectiveness—a trade-off that the pandemic’s supply chain interruptions have brutally demonstrated.
Only 21% of respondents in a recent Gartner poll said they have a highly resilient network today, in terms of better visibility and the agility to shift sourcing, manufacturing, and distribution activities around relatively quickly. It shows that many people will prioritize building resilience when they emerge from the present crisis. Within two to three years, more than half of respondents expect to be extremely resistant.
Here are four techniques to help preserve supply chain resilience and prepare the supply chain for the unexpected.
Have “safety stock” on hand to avoid shortages
Since products are so widely available these days, unless a business has exclusivity on something, a stockout may be the last time a customer considers buying from them.
The simplest method to create a more resilient supply chain is to have a buffer of safety stock. It means that firms can continue to serve consumers while simultaneously addressing difficulties in the background. While having stock buffers can be tough to justify due to the amount of cash flow it can tie-up, it is worthwhile if the enterprises can afford it.
Firms can employ this method for new product launches or seasonal sales times if it isn’t sustainable on a long-term basis. Businesses are sometimes chastised for not having enough products and then attempting to defend their lack of supply by claiming that they did not foresee demand.
Reshaping the global network
Through specific applications of redundancy, such as dual sourcing, a robust network for supply, manufacturing, and distribution achieves flexibility. Other strategies include near shoring to lessen reliance on complex global logistics and vertical integration to bring crucial component production (including IT-related components) in-house. When redesigning a worldwide network, a thorough risk assessment can help determine how to strike a balance between flexibility, efficiency, and effectiveness.
Create a foundation for long-term success
Every supply chain has social and environmental ramifications. All of the challenges surrounding sustainability do not disappear amid global disruption, from transportation network carbon emissions to industrial waste from companies to supplier ethics. Indeed, in a world with limited resources, sustainable supply chain strategies are even more critical.
The most effective approach is to incorporate sustainability concepts throughout the supply chain, using them to drive decisions ranging from product design and factory layout to sourcing and logistics. It demonstrates what businesses are increasingly learning: that sustainability and a solid bottom line can coexist – even in the most difficult of circumstances.
Lean on logistics professionals
Businesses will require not only access to solid supply chain infrastructure and technology, but they will also need to employ a professional logistics workforce to optimize the supply chain and establish resilience.
Many e-commerce companies lack supply chain or inbound and outbound logistics professionals, making it impossible to anticipate any potential interruptions that can be prevented or prepared ahead of time. As a result, many brands collaborate with Third-Party Logistics Providers (3PL).