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Innovative Approaches to De-Risk Supply Chain

By Swapnil Mishra - June 27, 2023 6 Mins Read

Innovative Approaches to De-Risking the Supply Chain

Keeping an eye on the ground and taking proactive measures like regionalizing product streams can help businesses avoid disruptions. Or at the least, it can reduce the harmful effects.

Supply chain collaboration is one of those common business terms that is simple to ignore until a catastrophic disruption occurs. Businesses abruptly face a shortage of raw materials, a product design flaw, and a production delay. IT leaders frequently have to deal with troubles brought on by market events and problems with the internal value chain.

Pervasive supply chain risks affect crucial customer, operational, and business metrics. Mostly the cause includes the ongoing pandemic, international and regional conflicts, and economic unrest. Being completely risk-free is not an option.

However, in normal and emergencies, organizations can concentrate on the best use of their resources and establish reasonable performance goals for every link in the value chain. Organizations are at increased risk for the reasons listed below:

  • Tendencies to be overly dependent on a small number of value chain participants, such as suppliers, customers, factories, and labor unions
  • Utilizing distorted data and asymmetric information to inform decisions
  • Processes, feedback loops, systems, metrics, and indicator gaps

Over time, a solid framework for risk management emerges, supported by competent personnel, strict procedures, and adaptable technology. Any framework must develop alongside the organization’s culture and strategy to be effective.

Global supply chains have experienced unprecedented disruptions in recent years. Businesses in various industries have faced uncertainty. This includes the ongoing effects of the pandemic, which caused significant production and shipping delays to the Ukraine conflict.

The ripple effect of such occurrences has revealed the fragility of current supply chains. This has compelled business leaders to evaluate current methods of operation. Inflation and interest rate spirals have only exacerbated this issue. They have highlighted the need for more flexible and resilient supply chains that can withstand the impact of future disruptions.

1. Digitizing quality control for greater accuracy and efficiency

Numerous groups are involved in quality management, such as self-inspecting factories and outside inspectors who visit facilities. Suppliers, retailers, and other parties can collaborate on standardized quality control by digitalizing quality management activities.

Businesses can use artificial intelligence to monitor facility risk, resulting in insightful business decisions and cost savings. Companies can evaluate the performance of their supplier base and understand it better with data integrity. Companies can adjust quality controls by categorizing factories and products according to risk.

For instance, perhaps factories at lower risk can handle self-inspections on their own. Tighter controls are necessary for high-risk factories producing high-risk goods. IT executives will eventually be able to maximize their resources, cut costs, and improve results.

2. The antidote to sustainability audit fatigue

Modern supply chains are under pressure from escalating sustainability regulations. Companies and their partners can access centralized data from a single source to make informed decisions. National policymakers frequently update rules as the supply chain’s partners and auditors grow.

Many customers develop audit fatigue because they track and report the same data to numerous partners and regulators. To capture and act on a comprehensive understanding of sustainable performance metrics, organizations need to centralize ESG-related information.

The data aids organizations in better-assessing risk, managing corrective actions with suppliers along the value chain, and demonstrating regulatory compliance.

3. Resilient supply chains using intelligent data

Transparency in supply chain management data is advantageous in a volatile market. Organizations can create a database of data containing the underlying causes of issues with quality and sustainability. They can also list out successful preventative and corrective measures. Future possibilities for utilizing that data intelligence for business value exist.

4. Take advantage of regionalization

Regionalized production has many competitive advantages over-centralization. These could be lower currency risk or a reduced impact of geopolitical issues. The flexibility to adjust manufacturing capacity in different locations according to the circumstances.

With a centralized sourcing strategy, interruptions can impact the entire production and supply chain. This can affect sales, clients, and even a company’s reputation. Companies must look extensively at wider swaths of the globe to regionalize production.

They must thoroughly examine data regarding the locations of suppliers, clients, and ship-to-sites. Organizations might find it helpful to get input from an outside perspective that can explain how products move. It allows them to ask questions objectively to make the best decisions.

Manufacturers must reduce their production and look into other regional opportunities to increase their sales and production power.

5. Updating current inventory regulations

For a strong SCM model, conventional linear models must be replaced with planning criteria, inventory policies, and supply networks. Risk analysis and business continuity plans will become crucial components in the conclusion of supply chain contracts.

The business environment changes and adapts to the new realities of the pandemic. Businesses will increasingly need to create unique, more scientific methods for re-evaluating customer demand, enhancing forecasts, and coordinating operations. In the coming year or more, this will aid in laying the groundwork for a return to operations as usual.

Technology has been at the forefront of supply chain transformations for a while now. Smart SCM models in this newly connected digital world make a new breed of supply chains possible. Digital supply networks (DSNs) are replacing linear supply chains in the marketplace. They help to break down functional organizational silos to promote better connectivity and transparency,

By enabling end-to-end visibility across the value chain and allowing deeper levels of collaboration between stakeholders, these networks are assisting in shaping the new-age business ecosystem. DSNs have artificial intelligence (AI) and machine learning capabilities that allow them to foresee disruptions and react appropriately in real time.

In addition to helping create new supply chains for future competitive advantage, new digital tools like the Internet of Things (IoT) are enhancing legacy supply chains. Such intelligent models have the potential to eliminate inefficiencies, streamline processes, and increase supply chain resilience. The ultimate and ideal goal for any business organization is that.

Also Read: Best Strategies for Supply Chain Risk Management

6. Collaboration with Vendors to Foster Flexibility

Understanding the methods and locations used by suppliers to obtain their raw materials is crucial. Supplier development engineers used to work for companies. They worked closely with suppliers to expand their operations and products; they weren’t just purchasing agents. This strategy fosters a solid, enduring relationship by promoting and assisting in raising the supplier’s business.

Consider having multiple sources for the same category of products to increase flexibility. There are backup suppliers available if one supplier goes out of business. Of course, using such a strategy would incur additional costs, so it’s important to find a satisfying compromise.

Today’s business leaders need to reassess the best strategies for resolving the puzzle from a global perspective. At the same time, they need to prepare for potential worries related to geopolitical tensions, labor shortages, yet another pandemic, or any other uncontrollable forces.

There will always be international and domestic events that nobody can predict or control. However, keeping an eye on the ground and taking proactive measures, like regionalizing product streams, can help businesses avoid disruptions and lessen their negative effects.

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Swapnil Mishra

Swapnil Mishra is a global news correspondent at OnDot Media, with over six years of experience in the field. Swapnil has established herself as a trusted voice in the industry, specializing in technology journalism encompassing enterprise tech. Having collaborated with various media outlets, she has honed her skills in writing about executive leadership, business strategy, industry insights, business technology, supply chain management, blockchain and data management. As a journalism graduate, Swapnil possesses a keen eye for editorial detail and a mastery of language, enabling her to deliver compelling and informative news stories. She has a keen eye for detail and a knack for breaking down complex technical concepts into easy-to-understand language.

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