If your company’s supply chain survived 2020 and the disruptions of early 2021, it’s safe to say it has passed the supply chain resiliency test.
Supply chain disruption has many sources: tariffs and trade disputes, natural disasters, pandemics, economic uncertainty and cybersecurity attacks. Each disruption has its own nuances, so it’s challenging to plan a precise response to each one. The goal is to build a supply chain that can stretch and recover from the inevitable disruptions from a whole host of threats.
To do that, shippers must be able to respond and adapt as quickly as possible to known and unknown risks. Embracing technology is part of that solution. It also takes flexible and redundant suppliers, systems, and talent to create an organization that survives and thrives while others struggle.
How To Overcome Supply Chain Disruption
Supply chain disruption is a fact of life for every company that moves any type of product. There won’t be a new normal, just new sources of disruption, from weather to government policies to industry conditions.
Your organization’s ability to anticipate disruption, adapt to events, and build resiliency is rooted in how you maintain operational continuity. You must have the people, processes, and systems in place to create your resiliency plan.
A wide range of events could prevent your supply chain from operating normally, but not all events have an equal impact. Severe weather can shut down entire locations for short periods, but recovery may happen quickly. Other issues such as trade disputes and tariffs develop over long periods with a high degree of uncertainty. Your supply chain must be capable of adapting to all types of threats.
Weather. Globally, natural catastrophes are the top concern for businesses in East Asia and the Pacific. January and February 2021 were characterized by repeated winter weather events nationwide. These are just a recent indication of the disruption from weather events and natural disasters that your supply chain may encounter. A storm may leave roads closed, warehouses shut down, utilities lost, and employees stranded. Alternative sourcing and routing, contingency plans and redundant systems can help weather any storm.
Trade disputes and tariffs. Global trade regulations and conflicts, as well as tariff threats as a political tool, could cut off sources and markets and push your business plan into the red. It’s vital to work with a supply chain consultant with global expertise to monitor these threats and develop solutions to lessen the impact on your business.
Cyber threats and attacks. Your company is likely under cyber attack as you read this. The bad guys only have to get it right once in a while to cause catastrophic disruption. Some of the largest companies in the industry have been forced to pay ransom to restore technical operations. Other companies have lost intellectual property or customer information and have not found out until the damage was done. It’s vital to identify and protect critical vendors and partners that could be unwitting attack vectors.
The average cost of a data breach reached $3.86 million in 2020, with compromised employee accounts the most common cause. Your transportation consultant can help develop response strategies to ensure your supply chain continues to operate while the problem is addressed.
Capacity constraints and transportation delays. Shifting consumer demand, bad weather, driver shortages, fuel prices and an array of influences conspire to shrink available capacity. During peak season 2020, small parcel shippers faced “shippageddon” due to the boom in e-commerce. Carriers pushed larger items out of the parcel networks and restricted volumes from parcel shippers.
Price fluctuations and sourcing issues. The pandemic drove up prices on many consumer goods as people shifted spending to e-commerce and bought at holiday levels in early spring. The system wasn’t prepared for the surge, driving up pricing for transportation and sapping inventory levels.
While the pandemic seems like a natural disaster, the long-term global disruption is unique. While supply chains are recovering, a recent survey found that 57% of shippers experienced longer lead times from suppliers in China.
The pandemic highlighted the interdependent nature of today’s supply chains. A virus in China disrupts auto manufacturing in Detroit, or a flood in Thailand takes out a cluster of research and production facilities. Abrupt disruptions can drive prices sky-high, or a vital product may not be available at any cost.
Work with a supply chain consultant who can help optimize your network design and ensure a strategic approach to your sourcing to anticipate these challenges.
7 Tips For Building Supply Chain Resiliency
Shortages of products from toilet paper to microchips during the coronavirus pandemic highlighted the value of supply chain resiliency, and the opportunities for companies that aren’t as prepared as they would like.
A supply chain built for resiliency allows a company to adapt to unpredictable forces while maintaining customer service. By contrast, supply chains that are too lean may not have enough flexibility and redundancy to survive unscathed.
A resilient supply chain incorporates alternative sources, carriers, routes, and other characteristics so that it can flex in response to a situation. Whether it’s a pandemic, severe weather events, trade disputes and tariffs, economic upheaval, or even unexpected surges in customer demands, you can’t prepare for every eventuality. Large companies with a supply chain risk strategy already in place couldn’t fully cope with the impact of the pandemic. Even in the worst of times, a resilient supply chain bends and stretches but never snaps.
A resilient supply chain doesn’t happen on its own. It’s the result of a deliberate strategy that may require tradeoffs compared to other approaches. Your plan should address technology, processes, and people. To build supply chain resiliency, leaders should consider these factors:
- Buffer inventory and shift away from JIT. The coronavirus disruptions highlighted the stressed nature of lean and just-in-time inventories. Those factories with essentially zero inventory of critical components were forced to close or drastically scale back. To increase resiliency, consider broadening the supplier base and adding local or near-shore sources. Analyze the inventory of materials or products necessary ensure there’s enough on hand to span brief interruptions. This strategy requires greater investment and inventory carrying costs but enables continued production.
- Utilize a TMS That provides real-time data to remain agile. Many companies rely on data that may lag several days. During a crisis, that’s entirely too late. Look for a TMS or a managed transportation services provider with the technological capability to provide real-time data to drive optimized decision-making. Pricing may vary significantly based on carriers and lanes and capacity constraints.
- Work with a supply chain expert to identify your vulnerabilities. Tap external expertise to assess supply chain risks and develop plans to adapt to them. Experienced 3PL providers have developed strategies for many other shippers and can adapt successful strategies for a customized resilience plan.
- Build relationships with your 3PL for capacity and alternative shipping solutions. Start with moving from transactional to strategic relationships in which all parties have a long-term mutual interest. When disruptions happen, and they will, your strategic partners are invested in your success. A savvy 3PL can tap their relationships to uncover capacity and alternative solutions that would otherwise be unavailable to shippers.
- Build organizational resiliency to support your supply chain strategy. Your organization must develop the capability to detect, resist and recover from disruption, regardless of the source. Build a strategy with the technology, people and processes that provide real-time visibility and analytical support to data-driven decision-making. There will be tradeoffs between cost and efficiency, and each organization must decide on its own terms how to solve those issues. But the pandemic highlighted the ability of companies who had already planned for disruption to bounce back, ahead of their competitors.
- Collaborate with Customers and Suppliers. While come companies are looking at supplier diversity, in some cases there are simply no alternatives for off-shore suppliers. Cloud-based collaboration tools connect suppliers and service providers for faster, more efficient shared processes, regardless of the time zone where the work occurs. Companies that remove friction in their ability to collaborate will be better prepared to establish alternative supply chain options.
- Redesign your network. Supply chain networks often grow organically as the company scales, so they are rarely designed. A thorough analysis can pinpoint redundancies and opportunities to slash costs and improve service through operational improvements. A well-tuned supply chain is better equipped to deal with disruptions than an ad-hoc system that’s stressed at the best of times.
Building supply chain resiliency starts with a commitment that the status quo is not good enough. Communication, technology and collaboration are key elements that support the strategy to prepare for the worst. The effort will pay off in a supply chain that performs optimally in the best of times as well as in the next crisis.
As Senior Vice President of Sales and Solutions at GlobalTranz, Ross Spanier leads the enterprise sales organization as well as the design and delivery of innovative and customized supply chain solutions that drive efficiency, cost savings and competitive advantages for current and prospective customers. With over 15 years of experience in the supply chain and logistics industry, Ross has developed and grown sales and operations teams specializing in best-in-class service execution of LTL, TL, expedite, supply chain management, projects & heavy haul, white glove and managed transportation service lines.