Today we recognize that the supply chain is a source of strategic advantage. In our quest to drive scale and reduce costs, we have architected supply chains spanning the globe. However, as these supply chains become increasingly globalized, they are also more vulnerable to disruption. Natural disasters, weather events, business cycles and more recent challenges, such as the threatened tariffs on Mexican goods, the ongoing trade war with China, and the outbreak of the coronavirus, highlight the need for shippers to create and maintain a resilient supply chain.
What do we mean by a “resilient supply chain?” In the past, logistics leaders focused primarily on protecting their supply chain from disruption via a “shield and protect” approach. For example, if a manufacturing facility was threatened by a natural disaster, companies could shift production to another facility. When margins were threatened by looming tariffs, shippers could “pull forward” large volumes of imports to avoid paying punitive fees.
However, today’s shippers must prepare for a whole host of other threats. As technology has evolved, shippers and suppliers have become more interconnected with their business and trading partners than ever. This interconnectedness and consistent exchange of data has ushered in a new era of efficiency, speed, and responsiveness within the supply chain, but those benefits come with a potential risk as well. It is no longer a question of “if” your supply chain may be hit by disruption; it is matter of “when.” Even if you have done everything in your power to safeguard your organization’s network, data, and systems, an intrusion or attack on one of your business partners can wreak havoc on your operation. In recent years, the relatively unsophisticated yet still potentially disruptive “phishing” scams have evolved into inordinately costly ransomware attacks in which an organization’s systems and data are in effect held hostage by hostile actors.
In this new environment, the “shield and protect” approach is no longer adequate. Logistics organizations must take more proactive measures by creating a truly resilient supply chain. Rather than solely focusing on protecting the supply chain from harm, business leaders must engineer their supply chains so they can quickly bounce back from inevitable disruptions.
How can shippers begin building resilience into their supply chain? Some of the same lessons learned in the physical world apply: thinking in terms of redundancy and flexibility, whether in terms of talent and expertise, systems, or partnerships. Building strategic redundancy in your supply chain is a necessary precursor for creating the flexibility you need to not only withstand disruption, but to thrive awhile your competitors struggle.
Simply put, if your organization lacks a wide and deep pool of expertise and options you could be confronted with a disruption that you don’t have a clear way to solve. Due to the interconnectedness of today’s supply chains, disruptions can have a ripple effect across your operation. For example, bouncing back from a ransomware attack requires not only deep expertise in systems and security, but may also require shippers to quickly find solutions for much-needed capacity as they seek to catch up on missed or delayed shipments. In this manner, an attack on your systems may ultimately place unexpected stress on other functional areas of your business. Ensuring that you have a deep bench of talented team members across your organization is essential.
System resiliency requires technical, process, and people focus. Having clear processes to re-route information with redundant, tested methods for ensuring accuracy and completeness is critical. Having your people effectively trained in those processes and systems is another necessary step. Finally, having worked with staff and partners to conduct end-to-end system tests will help mitigate the impacts of a disruption. A system is only as strong as its weakest point and without testing and clear validation processes, how can you know where that is? Leveraging consistent integration methods, constant evaluation of functionality through monitoring and evaluation, and clear validation processes supports the flexibility needed in today’s supply chain to quickly and confidently respond.
To have options in times of crisis, shippers must build partnership networks. This effort must be made proactively and far in advance of a potential disruption. Once a crisis hits, it is too late. Experience has shown that attempting to leverage a partner for a one-off solution during a crisis often results in failure. This concept of partnership networks should extend to all corners of your supply chain to include a robust network of technology partners, transportation providers, and more.
Many shippers have found that strategically partnering with a 3PL delivers benefits above and beyond the smooth transit of shipments. 3PLs can also serve as a relationship hub, acting as a single point of contact which connects shippers to the network of solutions providers they need to not only drive day-to-day value, but to overcome adversity when challenges arise. In addition to providing alternate sources of modal capacity, mature 3PLs offer a wide variety of services and solutions, from consultative supply chain design to value-adds such as high value/high risk cargo security, drop trailer programs, and more through strategic partnerships. Perhaps most importantly, your 3PL can help manage this network of resources and help maintain processes and connectivity, ensuring seamless integration of the solutions you need to build and maintain the resilience of your business.
Russ Felker is the Chief Technology Officer at GlobalTranz. Prior to joining GlobalTranz, Russ held multiple CTO, IT, and technology leadership positions, most recently providing technology advisory services for multiple private equity firms to drive portfolio improvement, advise on technology company acquisition strategy, and increase value realization.