Saturday, February 4, 2023

How Enterprises Can Prepare for Supply Chain Disruptions

By Apoorva Kasam - January 25, 2023 4 Mins Read

A supply chain disruption negatively impacts people, organizations, and activities that move a product from a supplier to a final customer.

Organizations need to evaluate potential supply chain risks and diversify the suppliers to prepare for unprecedented circumstances. Here are a few strategies to mitigate supply chain disruptions.

Establish a Contingency Plan for Supply Chain Emergencies

Businesses must have contingency plans in place for supply chain disruptions and emergencies. Companies need to identify every stage of the supply chain and strategize action plans. An ideal contingency plan needs to include how and when enterprises can contact customers about supply chain disruption. An estimation of disruption to each point on the supply chain will allow businesses to financially be prepared for each disruption. At the same time, an estimation of available inventory and backup inventory should be conducted. Companies need to divide the strategies according to the Prevention, Preparedness, Response, Recovery (PPRR) model when devising a plan. This model helps organizations simplify the contingency plan and allows them to audit and continually measure its success.

Also Read: Ways Enterprises Can Engage Supply Chain on Scope 3 

Audit Supply Chain’s Vulnerability

An integral part of preparing for supply chain disruption and establishing a contingency plan involves auditing the supply chain and identifying high-risk vulnerabilities. The primary aspect to consider is how vital each point of the supply chain is. Enterprises can utilize a ranking method to determine which suppliers are at high risk and how crucial they are to the business. Researching the suppliers and finding out if they have experienced supply chain disruption recently or could be seen as “high risk” because of their financial history or location is vital. Companies need to pin down what could cause supply chain disruption, how likely it is to happen, and how much it will affect the business.

Segregating each point in the supply chain into “low risk,” “medium risk,” and “high risk” will allow businesses to imply risk management strategies on the most vulnerable issues and gradually locate backup supplies.

Locate Backup Suppliers and Diversify Supply Base

A crucial part of preparing for supply chain disruption is to have backup suppliers and a diversified supply base. Enterprises need a consolidated list of suppliers and order fulfilment for each point in their supply chain for the different products or services they require. This allows the companies to access various suppliers easily in case of challenges with the leading supplier. At the same time, diversifying the supply base ensures the right people are at the right time to address the issue. Finding suppliers with supplies or manufacturers in multiple locations will provide a robust, diverse supply base to mitigate the effects of supply disruptions effectively.

Build up Inventory

Having backup quantities of goods will help the business survive future supply chain disruptions. Planning out what and how much goods are necessary to stockpile will help the organization manage disruption in the flow of the supply chain. Building up inventory is an added expense. Hence, an ideal time to increase the inventory is whenever the business expands or while launching a new product allowing companies to stock up while more goods are being brought in. At the same time, stocking up before times of the year when supply chain disruption is more likely, such as peak periods or periods when environmental factors, like hurricanes or flooding, could affect the suppliers.

Also Read: Slim.AI Unveils Beta Software Supply Chain Container Security as a Service

Enhance the Transparency of the Supply Chain

Supply chain transparency is difficult to achieve, making it a challenging aspect of the supply chain disruption management strategy. Transparency allows easy access to the processes and organizations in the supply chain to view and assess the supply chain. Lack of clarity will diminish the need to procure information about the suppliers of their distributors, leading to zero visibility. Inventory management tools and shipping tracker software allow businesses to gain more visibility on the supply chains. Enterprises can invest in the Internet of Things (IoT) tech and platforms to get precise, real-time data during the supply chain process like real-time manufacturing, shipping, and inventory reports.

Disruptions to supply chains are inevitable. Businesses with robust supply chain mitigation strategies can prevent and manage the effects of disruption.

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Apoorva Kasam

Apoorva Kasam is working with OnDot Media as a Global News Correspondent. She has done post-graduation in Bioinformatics and has worked in the healthcare industry. She is a technology content writing enthusiast and this is her first stint with a technology publication.

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