Many companies are working towards achieving the highest degree of resilience in a world full of change and uncertainty. An adequate supply chain strategy can make all the difference.
The global business landscape has been continuously reshaping for a while, and even though supply chain management was evolving, COVID-19 came to accelerate the expected transformation. Transportation disarranging, manufacturing lockdowns, and other disruptions exposed structural weaknesses and questioned the future of supply chain processes. In reality, supply chain solutions have been thought about and planned for from day one. In circumstances where companies buy from suppliers, who depend on raw materials from other companies, any change can damage the entire ecosphere.
With this knowledge, many companies were able to lower costs, get services and products to distant markets with extraordinary efficiency, and keep inventory minimal. However, the increase in unforeseen changes has overcome these efforts. With such complications, it is fundamental to manage risks in order to be resilient and innovative when it comes to supply chain solutions.
Turning supply chains into disruptors
Rather than waiting and planning for future disruptions, supply chains must become real disruptors as they build resilience. Take L’Oreal as an example; they’ve modified its supply chain by aggressively changing its business model to become a retailer with physical locations and direct-to-consumer capacities. In fact, only 21 percent of supply chain leaders declared having a highly resilient network today. Turning these companies into disruptors requires smart strategies that will help achieve resilience and demonstrate a deep understanding of consumer requests. Below, we offer five main supply chain strategies that work to build resilience in your daily business.
1. Branch-out suppliers
Acquiring significant portions of supplies portfolios with a single source needs to be re-evaluated; dependence on a single supplier, region, or country will not help mitigate risk. For instance, in 2011, major natural disasters in Japan caused delays on nearly finished cars that did not ship to customers because of inexpensive parts missing. Branching-out is a straightforward way to mitigate risk and assure good reasons for working with specific suppliers. Avoid single-source relationships. To introduce a reliable supply chain strategy, work to enlarge your network and develop a second source relationship.
Giving business to additional suppliers or working with an existing single-source supplier available to produce from different locations will help achieve a wide diversity of suppliers. To branch-out, supply chain leaders must know their supplier chains in detail and analyze suppliers by spend and revenue influence if a disruptive situation arises.
2. Develop inventory plans to build reserves
Building supply chain resilience requires us to consider developing strategic reserves. Understanding the essential materials needed to protect the overall business and realize how long it might take to react and recover is critical. Strategic reserves go mostly unnoticed until there is a crisis, but the value of having one has become very clear in recent years.
Calculate safety stocks to diminish the risk of production slowdown or block and concentrate on supply assurance versus shortage management. Supply assurance studies all the needed parts over a very long-range, considering possible shortages and obsolescence, and elaborates supply plans for those parts.
Optimizing inventory strategies and localizing replenishment models will drive order, flexibility, and service level performance, all needed to ensure materials are delivered when they are required.
3. Nearshoring
Many multinational enterprises have been moving toward regional manufacturing and sourcing trails to be closer to end markets. In response to stirring production expense compositions, trade barriers, advances in technology, and other disruptions, some companies have been realigning their global supply chain strategy. Reducing geographic dependence and shortening cycle times for finished products allows more control over inventory and faster transit for products moving closer to the end consumers.
With our experience assisting customers in all kinds of industries, nearshoring and offshoring can evolve into a long-term, seamless, and effective business strategy. TEAM International helps companies build and integrate relevant technology solutions to ensure operational transparency, expand their production capacity, lessen the financial burden, and collaborate with external suppliers in more agile terms and lower risks.
4. Explore the full potential of technology
Many companies are so focused on cost minimization that they have not yet realized the potential of investing in technology, which always adds value. Keeping up with change is not enough; resilient supply chains need to stay ahead. Technology helps organizations execute processes more quickly and precisely. Real-time analytics and judgment support tools, including enterprise resource planning (ERP), provide enriched data. These insights can help justify investments and assist managers in understanding the procurement process dynamics better.
Wanting to increase resilience comes with additional costs but with significant advantages. As a global supply chain software developer, TEAM has conceptualized, built, launched, and maintained custom technology solutions for businesses of all sizes. Investing in technology will help companies make better decisions about customer needs, production calendars, logistics, and delivery specifications to foresee future hurdles.
5. Predict and respond with celerity
Even for businesses with broad experience in global production and sourcing, the COVID-19 crisis has generated a demand to restructure supply chain solutions. Having the ability to stay on top of market trends, products, suppliers, and rising technologies distinguish best-performer procurement teams. A comprehensive supply chain strategy can predict opportunities and risks, giving room to take proactive responses long before competitors. Being prepared and able to take action when circumstances demand it has become crucial in the supply chain resilience. Cognitive sourcing platforms can help by tracing trends, supplier financial health and consolidation across scores of commodities, inflection points in demand and cost, making sure organizations identify market variations ahead of time and take precautionary steps with agility.
What we learned about supply chain resilience during COVID-19
Supply chain resilience comes from unnumbered disruptions, geopolitical tensions, trade restrictions, and other policies. Nevertheless, 80 percent of supply chain decision-makers indicated that COVID-19 has impacted their supply chain more than any other past disruptions. The pandemic blowout served as a wake-up call for supply chain leaders to strengthen the demand to prepare for a future disturbance. With many having to withstand gaps in their supply chains, taking close care of the supply chain resilience has become vital. However, not many companies have adequately fund resilience strategies and efforts.
Simply reacting to the outcomes of COVID-19 is not an efficient strategy. Changes in supply chain have been numerous; the only assurance is that there will be more to come. It’s almost impossible to make an accurate plan for the next crisis with so many potential disruptions. For example, a pandemic was always on the contingency list, but nobody was qualified to fight one. COVID-19 has taught us the importance of re-energizing the supply chain strategy by maximizing the business continuity plan.
Achieving supply chain solutions
The future of supply chain will keep evolving; we have learned that digital transformation is about developing a prevalent ability for informed and timely action. To succeed in the post-COVID-19 global economy, enterprises will require building supply chains that are resilient and sufficiently adaptable to capture new competitive sources. Top supply chains are rethinking their business models, recognizing the benefit from technology investments. Moreover, supply chain leaders acknowledge their organization’s needs for a digital-ready workforce with the talent to support and continue innovations.
A supply chain strategy must demonstrate a deep understanding of flaws and how to overcome them to remain relevant. Turning supply chain solutions into disruptors will deliver elevated customer experience and drive business growth.
