The ability for resistance and recovery defines a resilient supply chain. That means being able to withstand, if not completely avoid, the effects of a supply chain disruption, as well as quickly recover from one. Multiple sections of the supply chain are vulnerable to operational risk and disruption.
As we saw with COVID-19, worldwide disasters can have a far-reaching, global impact on supply chain logistics, suppliers, and workforces. Unexpected competition, unanticipated market movements, or even rapid changes in client shopping behavior can all cause supply chain disruptions.
Risk management has been an issue for as long as supply chains have existed. Because of the interdependence of all of its linkages, even a little issue in one isolated place might jeopardize the entire global supply chain. As a result, when important global trends and events occur, the risk of widespread supply chain disruption is enormous.
Risks to global supply chains and market disruptions are at an all-time high. The COVID-19 pandemic is, of course, the most well-known of these. According to a poll conducted by the Institute for Supply Management in April 2020, 95 percent of businesses have faced operational issues as a result of the epidemic.
Business executives all around the world believe that if they want to be more robust and competitive in the present market, they will need to modernize and make significant changes to their supply chain operations.
Other recent reasons that have had a significant impact on traditional supply chain processes include the quick rate of change in consumer behavior – as well as a very volatile trade and political climate.
E-commerce spending has tripled in the last decade, with a 149 percent increase in online purchasing in the first seven months of 2020 compared to the previous year. Consumer desire for fast delivery and personalized shopping experiences has risen in tandem with the growth of e-commerce.
The Amazon Effect describes how businesses and logistical networks have been affected by the growing expectation for next-day delivery.
Supply chain managers have had to make swift and significant modifications to their logistics and warehouse networks, as well as discover ways to cooperate with a rising number of third-party fulfillment partners, in order to be robust enough to respond to these growing demands.
Even before the COVID-19 ramifications, American firms were attempting to lessen their reliance on foreign manufacturers and suppliers. Businesses were looking for technological solutions to make their supply chains more self-reliant and resilient by 2019, as foreign tariffs and trade policies became increasingly unpredictable. Global company executives are increasingly prioritizing the integration of digital transformation and Industry 4.0 technology into supply chain operations.
Being able to respond promptly to operational disturbances and having a flexible contingency plan in place are both important aspects of good supply chain management. However, in order to be genuinely robust, a supply chain must be able to forecast and anticipate disturbances, and in many circumstances, completely avoid them.
“It’s not just about playing defense – it’s also about playing offense – finding competitive advantage by creating a supply chain resilience strategy centered on disruption avoidance,” PWC said in a 2019 statement regarding the importance of supply chain resilience.
Supply chain planning optimizes production in resilient supply systems. Strategic supply chain planning is critical for attaining resiliency because it synchronizes all supply chain components and increases visibility and agility. Supply and demand requirements are better understood, and production is synchronized, thanks to supply chain planning. This interconnected, forward-thinking approach aids firms in better anticipating problems, minimizing the impact of supply chain disruptions, and improving overall operations.
Understanding and using data is the foundation of resilient supply chains. When a company has the digital technologies in place to analyze and make sense of Big Data, supply chain resiliency improves significantly.
Artificial intelligence-enabled systems can curate diverse data sources from throughout the company and around the world. To discover trends and opportunities, news, rival activity, sales figures, and even consumer comments can all be studied together. The system’s connected devices are constantly monitored, providing real-time information about where and how workflows might be automated and streamlined.
Artificial intelligence (AI), machine learning, and current databases, among other digital supply chain technologies, not only procure and manage Big Data, but also analyse and learn from it in an almost limitless number of ways. This enables intelligent automation throughout the network and provides supply chain managers with the real-time data they need to respond quickly to disruptions and unexpected events.
Diversifying suppliers and manufacturing partners is how resilient supply chains work. To reduce operational and logistical complexity, supply chain managers have traditionally sought to limit the number of partners and suppliers in their network.
Social, environmental, and political stability are all important components of this strategy. Unexpected outages in one place might stymie or even shut down activities throughout the network.
“Disruptions to supply chain operations have intensified in the previous few years,” Gartner said in its June 2020 assessment of supply chain resilience methods.
This indicates that the cost of maintaining various supply locations should be considered a business expense rather than an inefficiency.” Supply chain managers can monitor complicated partnerships and supplier contracts even in the farthest reaches of their network thanks to resilient supply chain technology like blockchain, sensors, and advanced analytics.
Capacity and inventory buffers are used in resilient supply chains. Minimizing surplus and keeping inventory as lean as feasible has always been the key to supply chain profitability. Capacity and inventory buffers are expensive, therefore supply chain managers have frequently bet against disruptions to keep costs down.
When the pandemic struck, many businesses discovered the actual cost of their bet. Companies should alter their investment priorities toward resilience-building solutions, according to a recent article, and move from “just in time” to “just in case” when it comes to reorganizing their supply chains and manufacturing operations.
Supply chain operations might involve on-demand manufacturing, virtual inventories, and predictive demand forecasting using digital supply chain technologies to remain robust, even in times of crisis.
Benefits of A Resilient Supply Chain
Finding a successful balance between supply and demand in an increasingly competitive market is a major issue for any supply chain manager.
Many organizations have recently discovered the true cost of cutting costs on diversity, supply chain innovations, and other resilience measures. However, there are numerous potential business benefits when organizations invest in diversification, supply chain innovations, and other resilience measures, including:
Greater resilience frequently means less risk and more opportunity to invest in innovation and growth. Companies that prioritized supply chain resilience had up to 60% quicker product development cycles and were able to boost their output capacity by up to 25%, according to a 2020 global business analysis by Bain and Company.
Productivity gains: Resilient supply chain technology contributes to a system-wide increase in productivity. Supply chain leaders from around the world report increased productivity as a result of resilient supply chain systems, according to a 2020 McKinsey poll, and 93 percent of those surveyed expect to prioritize resilient supply chain strategies for investment in the coming year.
Risk reduction: In many firms, supply chain operations are the most vulnerable to risk and loss. Supply chains are by their very nature global in scope and complicated in operation. As a result, they are particularly exposed to danger.
Resilient supply chain systems reduce risk by giving organizations real-time visibility into all operations across the network, allowing them to improve and adjust their processes and logistics.
Technologies To Counter Supply Chain Resilience
Businesses need the resilience and competitive edge that digital transformation and modern supply chain technologies provide to respond rapidly to both disruptions and opportunities.
Artificial intelligence (AI): AI-powered supply chain systems can provide deep procedural and operational insights by obtaining and analyzing data from a variety of sources.
Predictive analytics and Big Data analysis can assist businesses estimate risk and demand, as well as recommend actions and solutions.
Machine Learning: As an AI application, machine learning enables the discovery of patterns in supply chain data and the identification of these key components – all while continuously learning.
As a result, supply chain managers may respond fast with the most efficient processes and operational strategies.
Industrial Internet of Things (IIoT): In a supply chain, an IIoT network is made up of connected equipment and items with sensors and unique identifiers that allow them to send and receive digital data. They gather information and communicate with the main system.
AI can evaluate and understand this data to help companies make quick choices and automate workflows and procedures throughout the supply chain.
Additive (3D) Printing: Smart factories can quickly reprogram 3D printers to make specific goods on demand without disrupting typical business operations for the long term.
Supply networks can safeguard themselves from disruption by having access to possible virtual stocks.
Autonomous Technology: Robots and drones can adjust their procedures on demand to meet quickly changing needs since they are intelligently automated for speed, efficiency, and precision. They also lessen the risk of injury by removing unduly repetitive or dangerous activities from human workers.
Data: Big Data, advanced analytics, and real-time insights are at the heart of the most resilient supply chain solutions.
Supply chain technology can be adjusted to work at their quickest and most resilient speeds when equipped with a modern ERP system and an in-memory database.
Supply Chain Strategies To Building A Resilient Supply Chain
Inventory and capacity buffers is the first strategy. Buffer capacity, whether in the form of underutilized production facilities or inventories in excess of safety stock requirements, is the most straightforward way to improve resilience.
The problem is that buffers are costly, and supply chain directors may have a hard time convincing the C-suite that they are necessary
For new product launches or expansions into new growth areas, leading companies use buffers in the form of surge capacity.
Organizations can also establish buffer capacity by carefully utilizing contract manufacturers for their surge requirements.
Diversification of the manufacturing network – As a result of the trade war between the United States and China, many businesses have begun to diversify their sourcing and manufacturing bases.
For some, this has meant finding new suppliers outside of China or asking existing partners to source supplies from other parts of Asia or nations like Mexico.
Multisourcing comes next – Major natural catastrophes in Japan and Thailand in 2011 disrupted global supply networks, exposing corporations’ reliance on single sources of supplies. Nearly finished cars in the automotive industry were unable to be shipped to customers due to missing, and often inexpensive, components. Multisourcing is a straightforward strategy to reduce this risk.
To develop a Multisourcing strategy, supply chain leaders must have a thorough understanding of their supplier networks and be able to categorize suppliers not just by spend, but also by revenue effect in the event of a disruption. Diversification can be accomplished by giving business to new suppliers or collaborating with an existing single- or sole-source supplier who can manufacture in many places.
Nearshoring follows Multisourcing – Some firms desire to eliminate geographic dependence in their worldwide networks and shorten cycle times for final products in addition to multisourcing. Because they add more participants and complexity to the ecosystem, regional or local supply chains might be more expensive, but they allow for more inventory management and bring the product closer to the end consumer.
Platform, product or plant harmonization – To allow items to travel effortlessly throughout the network, plant technology must be more harmonized as the network becomes more regionalized. One well-known example of harmonization in the automobile sector is the usage of common vehicle platforms for a number of models.
Another way to harmonize is to standardize components across many products, especially those that aren’t visible or vital to the client. This streamlines sourcing procedures and allows for bigger volumes to be distributed across multiple vendors, increasing resiliency.
Ecosystem partnerships – The COVID-19 incident has demonstrated the importance of a diverse sourcing strategy. Collaboration with strategic raw material suppliers and external service partners, on the other hand, is critical to ensuring future preparedness and resilience.
Strong ties with contract manufacturers and global 3PLs can be critical in diversifying production and distribution to several nations for enterprises lacking the ability to handle multiple sites on their own.
According to a Gartner survey data, roughly half of supply chain organizations are either using external manufacturers or exploring how they can support product moves, with a similar proportion enlisting the help of logistics partners.
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