Supply chains have become more complex and vulnerable due to globalization, and businesses ofany size must take proactive steps to protect their operations from possible disruptions.Even small slowdowns can ripple throughout the supply chain, creating major bottlenecks thatcan reduce output, raise costs and push dissatisfied customers away. But businesses mustbalance two strategies that can often seem at odds — creating a supply chain that isflexible and resilient while also maintaining efficiency and keeping costs in check. Thisarticle will explore how to develop a resilient supply chain that can help businessesachieve long-term success and even avoid future risks — a must in today’sdynamic and unpredictable business landscape.
What Is Supply Chain Resilience?
Companies with resilient supply chains prioritize identifying vulnerabilities, then implementstrategies and technologies to help minimize — and even avoid — their potentialimpacts. This is often accomplished by integrating siloed operations for increasedvisibility and investing in technology, such as automated data collection and companywidebusiness platforms. By strengthening supply chain operations, businesses can better servetheir customers and gain a competitive edge, even in the face of volatile demand andincreasing global pressures.
Key Takeaways
- Resilient supply chains are better at withstanding threats, including natural disasters,material scarcity and other disruptions, that, if not planned for, can raise costs andharm the customer experience.
- Businesses can increase their supply chain’s resilience by focusing on contingencyplanning, agile operations, increasing visibility and working with partners, among otherbest practices.
- Maintaining a resilient supply chain is a continuous process that requires monitoringand regular improvements as strategies and technology evolve.
Supply Chain Resilience Explained
Supply chain resilience is a measure of how well a supply chain can withstand and recover fromdisruptions and breakdowns, regardless of whether the challenges are predictable orunexpected. Resilient supply chains maintain continuity of their essential functions, suchas manufacturing and delivering goods to customers. On the other hand, weaker supply chainsare less likely to be able to effectively respond and adapt to challenges like naturaldisasters, material shortages or global market shifts. Resilient supply chains often employtechniques like process mapping and predictive risk analysis to plan for contingencies andproactively mitigate potential threats before they become major disruptions, often throughsophisticated technology and robust data collection and analysis. Disruptions in the supplychain can have significant negative effects on businesses, including increased costs,delays, revenue loss, reputational damage and customer dissatisfaction. By focusing onresilience, businesses can minimize these impacts and quickly recover when supply chainbreakdowns occur.
Supply chains have been put under the spotlight in recent years, due in large part toshutdowns caused by the COVID-19 pandemic, changes in international trade policy and globalconflict. Experts suspect that these widespread disruptions may become more common in thefuture. Research conducted by the global management consulting firm McKinsey & Co.estimates that supply chain disruptions lasting a month or longer will occur every 3.7years. As a result, McKinsey says, companies should expect supply chain disruptions to“erase half a year’s worth of profits or more” over the next decade,averaged across industries. Different industries have different processes and risks, butmost businesses rely on some form of a supply chain to procure raw materials, manufacturegoods and deliver them to customers.
Importance of Supply Chain Resilience
Modern businesses are exposed to new vulnerabilities as globalization continues and supplychains rely on far-reaching and compartmentalized processes. As stated in the 2022 EconomicReport of the President, “As supply chains have increased in complexity, firms’need for risk management has also grown.” If businesses are unable to effectivelymanage supply chain risks, their bottom line will likely suffer because “when unableto produce due to lack of inputs, firms lose revenue,” the report states. Furthermore,companies will likely not be able to meet other obligations, such as effectively fulfillingorders or maintaining quality standards.
However, businesses must focus on attainable and realistic goals. According to the report, itis “not cost-effective for firms to invest in completely avoiding alldisasters”; instead, they should focus on prioritizing risks and making smartinvestments. These investments include general fixes that increase efficiency andproductivity to minimize waste and raise output. Businesses can also reduce risk exposurethrough external changes, such as reducing overreliance on a single supplier ortransportation route.
A primary goal of supply chain resilience is to create contingencies that balance theadditional costs of building resistant operations with the revenue that would be lost if anunforeseen disruption were to occur. Decision-makers should also consider nonfinancialrisks, such as reputational damage and customer loss, when running cost-benefit analyses, asqualitative losses can also contribute long-term harm to business performance. By investingin a more resilient supply chain, businesses can take proactive steps to ensure that theyare prepared for future challenges and maintain high standards of goods and reliabledeliveries for their customers, while reducing costs and optimizing operations.
Key Components of a Resilient Supply Chain
Every business has its own supply chain, equipped with unique ways to satisfy its needs. Butmost resilient supply chains will likely share these four key components:
Contingency
Contingency often takes two forms — backup processes, and extra supplies and inventory.For the former, many businesses foster relationships with additional vendors and spreadresponsibilities throughout multiple locations. By maintaining multiple pathways forsupplies and goods to flow through, businesses can avoid shutdowns by increasing thecapabilities of one path to compensate for a bottleneck or slowdown in another. The otherform of contingency, holding additional supplies and inventory, helps maintain businesscontinuity during periods of material scarcity or slowdowns. For example, if an equipmentmalfunction causes a factory to slow production, businesses can rely on a safety stock offinished goods to meet promised order fulfillments and delivery times. However, neither formof contingency comes without costs, and businesses should consider what levels of redundancythey can afford. A hasty, ill-informed decision can negatively impact profit margins andmake reducing the risk of a disruption more costly than the risk itself.
Flexibility
A resilient supply chain must emphasize flexibility, as rigid operations are more likely tobreak under pressure. Flexible, or agile, supply chains can quickly switch to alternativeprocesses to avoid major slowdowns when changes are needed, such as pivoting to a newproduction method when consumer demand shifts. This is especially important for ecommercebusinesses with potentially viral products, as having to sluggishly slow down or ramp upproduction can lead to high carrying costs for unsold inventory or empty shelves,respectively, not to mention the related risks of dissatisfied customers and unrealizedprofit potential.
In addition to optimized production and inventory allocation, flexible supply chains caneffectively switch processes when standard operating procedure becomes bottlenecked orinefficient. For example, if ports become congested, a flexible supply chain can quicklymove shipments to air and/or truck freight, bypassing crowded ports and maintaining deliverystandards. Flexibility is often achieved through comprehensive and automated data collectionto give leaders access to detailed metrics, such as supply levels, production rates andother relevant key performance indicators (KPIs). Many business platforms automatically flagproblem areas for review, helping managers detect issues early and make changes to addressthem before they affect customer satisfaction.
Visibility
Fortifying the supply chain requires a high level of visibility, as problems cannot be solveduntil they are identified. Businesses must monitor their supply chain and track any changesin capacity or lead times. This can present challenges, as visibility may require additionalinvestments and new technology. Data collection and analysis tools are often integrated witha business platform, such as an enterprise resource planning (ERP) system, to givedecision-makers a more complete view of their supply chain. This data is often organizedinto customizable reports that can be generated to show as much or as little information asneeded, giving analysts quick access to all the information relevant to the issue at hand.Visibility into this data helps businessessee areas where slowdowns occur and informs decisions on how to improve overall supply chainperformance. Supply chain audits, often conducted by external experts, can also shed lighton problem areas that require special attention. Once a business achieves the visibilityneeded to gain a holistic view of the supply chain, it can find and implement ways tostrengthen operations and build a more resilient operation.
Collaboration
Effective collaboration requires trust and transparency with partners to identify root causesof problems and implement strategies to address weaknesses. This often necessitates datasharing and open communication among suppliers and distributors so that all partiesunderstand each other’s needs, capabilities and vulnerabilities. Collaboration is alsocritical for internal teams, as upstream and downstream communication is necessary toprevent unforeseen consequences to supply chain improvements. For example, say a businesswants to increase its output by investing in more efficient manufacturing equipment. Beforepurchasing that equipment, the business should work with its suppliers to ensure thatprocurement can increase to match the new rate at which raw materials will be needed.Similarly, distributors and shipping teams should collaborate with manufacturers to preventwarehouses and loading docks from becoming cluttered and reaching capacity while output isrising, delaying orders. By improving collaboration, an otherwise fragmented supply chaincan be integrated, leading to streamlined operations, reduced costs and increased customersatisfaction.
Best Practices for Building Supply Chain Resilience
Building a resilient supply chain is not a one-size-fits-all solution. It requires continualmonitoring and adjustment as markets evolve and new challenges arise. These best practicescan help businesses build a more resilient supply chain to maintain that adaptability.
Develop a Risk Management Plan
Simulate Supply Disruptions
Consolidate Organizational Responses Proactively
Diversify Suppliers
Collaborate With Suppliers and Partners
Continually Monitor and Adapt
Understand and Leverage Data
Invest in Demand Planning
Implement Capacity and Inventory Buffers
Build Checks and Balances
Invest in Sustainability
Invest in Technology
Risk managementplans are essential for building a resilient supply chain. Creating an effective riskmanagement plan requires analysts to identify and assess risks to operations beforedeveloping contingencies. No business has unlimited resources, and, therefore, it musttake care to prioritize risks, typically according to urgency, resource requirement orloss potential. Analysts often develop risk management plans in collaboration withstakeholders and the managers who will be implementing them to ensure that everyoneinvolved can react quickly when needed; this collaboration also provides opportunitiesto discuss any overlooked details or collateral impacts. By creating detailed riskmanagement plans, organizations can respond effectively to disruptions and strengthenthe overall resilience of their supply chain.
Maintaining supply chain resilience requires more than good instincts and guesswork. Manybusinesses use planning and forecasting technology that allows decision-makers to runwhat-if scenarios to ensure that decisions are well informed and backed by data. Somebusiness platforms create a digital twin of supply chain operations to simulate howproposed changes or disruptions will impact operations and give analysts tools to divedeep into existing workflows to increase visibility — all without impacting theactual operations themselves. These what-if scenarios and simulations are especiallyuseful for businesses facing tough decisions on prioritizing fixes, as twovulnerabilities may have similar short-term repercussions but could have majordifferences over the long-term. For example, two vendors may offer similar terms andprices, but if one has longer lead times, that slowdown could create bottlenecks anddelay the entire order fulfillment process, especially if an external disruption occurs.This compounded slowdown can eventually lead to disappointed customers and a drop insales. Sophisticated simulations can help businesses prioritize and implementimprovements that fit their needs and help leaders remain confident that their decisionsare based on detailed data, not hunches.
When a problem arises, businesses with planned and consolidated organizational responsesare better prepared to address the issue and adapt than businesses scrambling to addstaff to hastily assemble teams. Proactively facilitating coordinated responses helpsbusinesses effectively allocate resources and assign responsibilities ahead of time,minimizing the time between identifying a problem and implementing a solution. Proactiveplanners have more time to effectively study and adjust previous responses to create thebest path forward, rather than focusing on firefighting and damage control. Thisstrategy also fosters collaboration among multiple departments and stakeholders to bringin expertise that can be the difference between a rushed bandage and a thoughtfulresponse that addresses the root causes of the disruption.
Supply chains that rely on a single source for raw materials are vulnerable to disruptionif their supplier shuts down. The shutdown could be a temporary or permanent closurethat limits access to the materials needed to keep a business operating smoothly. Manyof these shutdowns are caused by regional occurrences, such as weather events, and 86%of the 1,500 global supply chain decision-makers surveyed for the Interos Annual GlobalSupply Chain Report said their organization “currently has too many suppliersconcentrated in one area.” Businesses using regionally diverse suppliers canminimize the risks of a shutdown from a natural disaster or sudden global trade upheavaland can prevent one slowdown from fully interrupting operations. Diversifying suppliersmay require additional time and resources to manage effectively, but many businesses usesoftware with supplierrelationship management integration to collect and compare data, such assupplier performance and costs, which can lead to more efficient procurement andstronger negotiating power.
Partners are often on the front lines of the supply chain segments that presentvisibility challenges to businesses. For example, an IT business may rely on computerchips from an overseas vendor, but it may not have access to real-time data on theavailability of the materials that are used to create those chips. According to the 2023HUBS Supply Chain Resilience Report, raw materials shortages were responsible for2022’s top supply chain disruption, with 61% of respondents saying the disruptionimpacted their business. By establishing and maintaining healthy relationships withsuppliers, businesses have a front-row seat to these issues and can get a head start onmitigating their impacts. Businesses can also apply what they learn from theirsuppliers’ expertise to strengthen operations throughout the supply chain,creating a more streamlined and resilient organization from procurement through finaldelivery. This same collaboration can apply to other partners, such as distributors,retailers or even customers, who can offer valuable feedback on the quality of goods,delivery times, the overall ordering experience and whether expectations were met.
A supply chain perfectly suited to navigate today’s economy — if such a thingexisted — might not be as effective next year, next quarter or even tomorrow, asmarket conditions are constantly evolving and new challenges arising. Fresh strategiesand best practices help businesses keep up with changing demand patterns and keepcustomers coming back. Innovative technology, such as automated data collection, isoften leveraged to give stakeholders a real-time view of business performance. All ofthis helps maintain a state-of-the-art supply chain, rather than one better suited forlast year’s market. But when transforming their supply chains, businesses mustmake sure to balance new advancements and methods with tried-and-true strategies thatare still relevant and effective. Institutional knowledge, experienced staff andlong-standing company policy still play crucial roles in problem-solving and keepingstaff on the same page. Whatever balance of old and new techniques a business chooses tofollow, strategy should be implemented deliberately, and goals and methods should beclear to all relevant parties. Disjointed and siloed operations can lead to chaos, asinefficient redundancies slow the flow of goods and issues go undetected.
Businesses need large amounts of reliable data from both internal and external sources tomonitor any changes or threats to the supply chain. When using information from externalparties, such as self-reported vendor data or market research, it is important to checkfor accuracy and potential biases. Decision-makers relying on inaccurate or incompletedata are more likely to draw incorrect conclusions and may implement strategies thataddress only symptoms of problems — or worse, add inefficiencies or newbottlenecks into the supply chain. Many businesses use ERP platforms or control towersto validate and organize this data into accessible and easy-to-understand formats, oftenthrough intuitive dashboards. Business leaders can use these systems to analyze overallperformance KPIs to see big-picture trends and zoom in to more granular information tofind specific areas for improvement.
11 Critical Supply Chain Metrics to Track
Supply chain management systems are essential, butthey only get you so far—you need to know what data really matters. Thisquick list of KPIs can help you identify areas ripe for cost-cutting and gaps inyour customer experience, all while improving demand planning, purchasing,manufacturing, and inventory management.
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Building a resilient supply chain requires forecasting and planning to givedecision-makers an accurate picture of future challenges and expectations that thesupply chain will have to meet. Demand forecasting models typically use data, such ashistorical sales, market research and seasonal adjustments, to give businesses a roadmap to follow when planning production rates. But demand planning is more than justforecasting. It incorporates supply chain management and inventory allocation tominimize waste and increase the resiliency of every step of the supply chain thatcompanies rely on to meet customer demand. Businesses that view demand as a holisticbusiness strategy — rather than just focusing on whether inventory matchesprojected sales numbers— can find more areas where order lead times can bedecreased, and the entire customer experience can be more satisfactory and efficient.
Even the most sophisticated forecasting models cannot account for every variable and arerarely perfect, especially in the ecommerce world. Establishing buffers in the supplychain, such as holding excess inventory or producing goods above forecasted values, canreduce the likelihood of stockouts and backorders and can help keep operations flexibleand resilient, even in the face of fluctuating demand and disruptions. Businessesoperating with small margins or producing customized goods may not find the highercarrying costs and muted distinctiveness of their products worth the investment, but forbusinesses offering mass-produced or standardized goods, a cushion against demandvariability can provide a competitive advantage when products go viral or shortagesoccur.
Overreliance on any single business process can spell disaster if that process breaksdown. Businesses can reduce this risk by building redundant operations that can take onmore responsibility when parallel workflows fall behind. These redundancies are oftenregionally diverse to help minimize shutdowns from natural disasters or trade-routebottlenecks. Many businesses are also reshoring or nearshoring parts of their operationsto keep some processes closer to home base and less dependent on international tradeagreements, tariffs and global freight pressures. However, creating backup processestakes time and resources, and requires monitoring to keep them agile and ready to actwhen disruptions occur. Many businesses rely on software to track these redundancies andeffectively manage goods and materials. By using technology, like centralized databasesand automatic alerts, these systems can strike the desired balance between limitingcosts and minimizing risks, ultimately creating a more resilient supply chain.
Many consumers value environmentally conscious companies and choose to shop for productsthat are sustainably sourced and produced. But in addition to luring “green”customers, sustainability can also helpbusinesses add resilience to their supply chains by creating more long-term viability,reducing dependence on external vendors and reducing waste. The high-efficiencyequipment that often comprises a sustainable supply chain can also reduce utility billsand raise productivity — if the business can afford the initial investment tooverhaul processes into a more sustainable operation. Additionally, as governments setnew environmental regulations and policies, businesses that emphasize sustainabilityearly and independently are more likely to stay ahead of the curve and continue makinginvestments at their own pace, giving them more control over when and how much theyspend to reach benchmarks that fit the company’s values.
Supply chain technology has come a long way in recent years, and businesses can leverageit to manage complex operations and build a more resilient supply chain. Centralizedsystems, such as ERP software or supply chain control towers, are powerful tools thatcan integrate data and workflows throughout an entire organization and give stakeholdersthe end-to-end visibility they require to find areas for improvement and trackperformance. Remote workstations and mobile technology, for example, keep informationflowing upstream and downstream, regardless of how widespread a company’soperations may be. This open communication can quickly alert relevant parties about anyslowdowns or changes in pertinent information, giving managers the best chance to fixproblems before they intensify and create major delays. With modern technology,businesses can access many essential supply chain management tools with the touch of abutton, and effectively leveraging these tools can keep even complex, global supplychains running smoothly and efficiently.
Technology’s Role in Supply Chain Resilience
Maintaining a resilient supply chain in today’s market presents many challenges, andbusiness leaders need to use every tool at their disposal to effectively manage theiroperations. By implementing the latest technology, supply chain managers can removeguesswork and ensure that their decisions are well informed and focused on long-termsuccess.
Rise of Digital Supply Chains
In the past, supply chains needed auditors monitoring the front lines — counting boxes,timing shipments and reporting on every aspect of the operation. But today, many businessesleverage virtual systems, known as digital supply chains, to control processesand increase visibility from the first step of the supply chain through final delivery ofproducts. These digital supply chains use sophisticated technology, such as Internet ofThings devices, to track goods as they move through the supply chain. The virtual systemthen mines that data and integrates it with other information to create a holistic andreal-time picture of the supply chain that authorized users can access to monitorperformance and spot places for improvements. Digital supply chains can also foster morerapid collaboration, as information is updated in real-time and all relevant parties canaccess data and communication from a single centralized program.
Data Analytics and Artificial Intelligence in Supply Chain Resilience
Due to the sheer volume of variables involved with maintaining a resilient supply chain,businesses will likely need to increase their analytics capabilities as they grow, often byimplementing artificial intelligence (AI) to help analyze and forecast everything fromcustomer demand to freight-disrupting weather. AI can be used to reveal insights into thesupply chain’s strengths and weaknesses and can give actionable suggestions to reducerisks and increase efficiency. Machine learning can also be employed to identify patternsand help analysts pinpoint root causes of problems when making data-heavy improvements, suchas inventory optimization. Data analytics tools that use AI technology can enhancedecision-making capabilities and improve response times to disruptions, building a moreresilient supply chain that can adapt to changing market conditions and deliver superiorcustomer service.
Benefits of Technology in Improving Supply Chain Resilience
Just about every aspect of a supply chain can be improved with technology, but businessesmust take care to prioritize their investments based on their needs. Companies that useresources without proper and deliberate planning may end up with expensive but near-uselesssystems. For example, some manufacturers might be able to install 3D printing technology toquickly create customized products on demand, with minimal recalibration and disruptions tostandard operations — but factories that produce only one type of good, onethat’s open to few changes or fluctuations in design, may not benefit from this typeof equipment overhaul. Some supply chains can also be improved with automated robots thatperform tasks like inventory sorting, picking and processing, freeing up staff for tasksthat require manual intervention. Many similar automated systems and other beneficialtechnologies can be managed from anywhere, and be scaled in pace with a business’sgrowth, with a cloud-based system, such as an ERP solution.
Government’s Role in Supply Chain Resilience
Functioning supply chains are necessary to keep a nation’s economy thriving and goodsflowing from businesses to customers. Governments can create guidelines, policies andregulations to help both private and public supply chains remain resilient, even in the faceof global challenges. For example, in February 2021, the U.S. government issued theExecutive Order on America’s Supply Chains to make sure American supply chains retainthe resilience they need to ensure “economic prosperity and national security”in the face of such far-reaching and diverse threats as “pandemics and otherbiological threats, cyber-attacks, climate shocks and extreme weather events, terroristattacks, geopolitical and economic competition, and other conditions” that can causeshutdowns.
The government set out to achieve this goal by directing heads of government agencies andleaders in industry, academia, labor unions and other outside stakeholders to collaborateand conduct a full review of critical goods, materials and the manufacturing capabilities ofthe nation’s supply chains to measure their current risks and resiliency. Thiscollaboration led to a detailed report, released in February 2022, that laid out successesand failures in America’s supply chains, with recommendations for future investments,including quadrennial reviews to create an ongoing system of continuous improvement.Governments from all over the world are taking similar steps to bring in leaders from publicand private sectors to ensure that supply chains remain resilient and secure as marketconditions evolve.
Supply Chain Resilience Examples
Every business faces unique challenges and will likely need well-planned and deliberatestrategies to build resilience into their supply chain. Here are some examples showcasinghow companies in diverse industries have overcome their supply chain challenges and improvedoperations.
- Winky Lux, a NewYork-based health and beauty company, was experiencing supply chain delays due toinefficiencies in its financial, inventory and ecommerce systems. When purchase orderschanged, multiple systems needed to be updated, and communication delays with overseassuppliers led to rushed shipping to ensure that goods arrived on time, often costing upto seven times more than standard shipping rates. By upgrading to a centralized ERPsystem that could integrate with its ecommerce and suppliers’ systems, Winky Luxwas able to eliminate most manual processes and speed up supply chain operations. Thisupgrade brought more resiliency to Winky Lux’s supply chain, reduced costs anddelivered a more reliable experience to its customers — and led to a forecasted40% sales growth.
- MRS Packaging, a food and beverage companylocated in Dubai, needed to prioritize inventory optimization when it upgraded itssupply chain to minimize the risk of perishable goods spoiling. As part of that effort,MRS expanded its demand planning with the help of a new ERP system, enabling it togenerate accurate forecasts. This created a more flexible supply chain, capable ofmeeting customer demand and cutting excess inventory by a third — all whileeliminating stockouts. This increased resilience gave the company more freedom to focuson growth and invest in new endeavors, such as more sustainable packaging and healthysnacks.
- New Jersey-based Seaman’sBeverage and Logistics requires a supply chain capable of complying withmultiple sets of regulations, including various distributor types, local laws andchanges in alcohol regulations. If the company does not remain vigilant while importingand shipping its products, it can accrue costly fines and reputational damage. Byleveraging its ERP system, Seaman’s can maintain a flexible and scalable supplychain that can adjust quickly to changing regulations and keep customers notified of anychanges to their orders. The system also gives decision-makers suggestions aboutimproving metrics, such as profitability per case of product, emphasizing bothefficiency and resiliency.
The coronavirus outbreak impacted men’s apparel brand Alton Lane well before it began spreading rapidly in the United States. Alton Lane sources fabric for its custom suits, shirts and pants from England, Portugal and Belgium. That fabric is sent to tailors in Western Europe and Asia, who turn it into the brand’s clothing and accessories.
When the coronavirus reached Italy, the fabric mills Alton Lane uses in that country shut down for a few weeks, breaking a key link in its supply chain. However, the redundancy the Virginia-based retailer built into its supply chain prevented this from being a crippling event.
Alton Lane was able to quickly reroute orders. It has factories in Spain, Portugal, Germany, Thailand and Vietnam, and it helped that certain Italian mills had fabric stored at a distribution center in Hong Kong. The retailer has continued to make almost every product it sells, with the exception of belts, as just one factory manufactured those.
This supply chain resilience paid off in another way. Alton Lane faced a dip in sales as it temporarily closed all 12 of its showrooms, where it does most of its fittings and business. But as it redirected orders, certain partners gave the brand breaks in exchange for receiving a larger book of business.
Build Resilience in Your Supply Chain With NetSuite SCM
Building a resilient supply chain requires robust and regular data collection, plus analyticsto ensure that operations remain resilient when market conditions change andcustomers’ needs evolve. With NetSuite Supply Chain Management (SCM),businesses can track and oversee processes from initial procurement to final delivery.NetSuite’s cloud-based SCM software can streamline communications among internal teamsand business partners, such as suppliers, to ensure that everyone is working together tomeet a business’s needs.
With NetSuite SCM’s real-time tracking, inventory management and order updates as goodsflow through the supply chain, decision-makers can be confident that they are makingwell-informed improvements and increasing overall operational efficiency. Thesoftware’s integrated demand planning, predictive analytics and forecastingcapabilities not only build but maintain a resilient and flexible supply chain, capable ofscaling as a business grows and delivering for customers — both today and tomorrow.
Supply chains are more complex than ever, and identifying, prioritizing and mitigating therisks they face can present major challenges to businesses of any size. But building aresilient supply chain is not impossible, and by following best practices, such asdiversifying suppliers, simulating disruptions, building redundancies and more, businessescan add resiliency to their organization without sacrificing the flexibility required tokeep up with ever-changing customer demand. Businesses willing to invest in technology toattain the visibility necessary to effectively manage the supply chain may be betterprepared for tomorrow’s challenges — but only when investments are madedeliberately to address the business’s specific needs. By effectively leveragingtechnology and preparing for potential disruptions, business leaders can establish resilientsupply chains, while reducing costs and delivering a better customer experience.
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Supply Chain Resilience FAQs
What is supply chain resilience?
Resilience refers to a supply chain’s ability to anticipate, adapt to and recover fromdisruptions, uncertainties and risks while maintaining business continuity. It requiresflexibility to respond quickly to disruptions, minimize negative impacts and recoveroperations, and it is often achieved through leveraging new technology, such as artificialintelligence and machine learning, to collect and organize data and gain the visibilityneeded to maintain a resilient supply chain.
What is a supply chain resilience example?
Winky Lux, a New York-based health and beauty company, was able to create a resilient supplychain by upgrading to a centralized system that could integrate with its ecommerce andsuppliers’ systems, thus streamlining operations and speeding up communication withoverseas suppliers. This reduced shipping costs and increased customer satisfaction, leadingto a growth in sales.
How do you build supply chain resilience?
Businesses can build supply chain resilience by focusing on four key components of theirsupply chain.
- Redundancy, which creates backup processes and inventory that businesses can use whendisruptions occur.
- Flexibility, which allows businesses to quickly adapt to and mitigate the negativeeffects of changing market conditions.
- Visibility, which is critical to maintaining a resilient supply chain, as it allowsmanagers and business leaders to identify weaknesses and find areas for improvement,potentially avoiding disruption.
- Collaboration among partners and internal teams, which yields insights into how best tomanage risks and ensure that contingency plans will be executed quickly and efficiently.
What role does risk management play in supply chain resilience?
Risk management plays a crucial role in supply chain resilience because it identifies,assesses and mitigates potential risks, allowing organizations to proactively plan andimplement strategies to maintain continuity and minimize any undesirable impacts on supplychain operations. Risk management also helps businesses prioritize the risks that are mostrelevant to their organization so they can decide what steps to take to manage themeffectively.
What are some common threats to supply chain resilience?
Supply chains can be threatened by internal inefficiencies, such as production bottlenecks;wasteful manufacturing processes; or poor communication among links in the supply chain.They can also be threatened by external disruptions, such as trade wars, internationalconflicts or natural disasters.
How can businesses prioritize investments in supply chainresilience?
Businesses can prioritize investments in supply chain resilience by conducting a supply chainaudit to identify vulnerabilities and prioritize areas of improvement. This helps businessesunderstand the costs and benefits that improvements can bring and helps leaders decide whichones are necessary and how much the investment should be. Businesses can also run scenariosimulations during planning phases to weigh their investment options.
How can sustainability practices improve supply chainresilience?
Investing in sustainability practices can strengthen supply chains by reducing waste andreliance on external suppliers. Additionally, sustainable operations typically usehigh-efficiency equipment that can cut costs and boost productivity, creating a supply chainmore capable of maintaining output during slowdowns. Proactive sustainability investmentscan also keep businesses ahead of new government standards, allowing businesses to invest attheir own pace and control expenses, while upholding their values.
How can companies build a culture of resilience within theirorganizations?
Companies can build a culture of supply chain resilience by fostering a proactive mindsetthat focuses on the importance of early detection and problem-solving throughout theorganization. Business leaders can emphasize the importance of employees as front-lineassets in identifying supply chain weaknesses and valuable components of the solution— in both the planning and implementation phases. By integrating resilienceconsiderations into training and performance metrics, employees can be empowered toanticipate, adapt to and respond effectively to disruptions, ensuring the long-term successand sustainability of the supply chain.
How can organizations stress-test their supply chains to identifypotential weaknesses?
Organizations can stress-test their supply chains through scenario simulation and rigorousevaluations to identify potential weaknesses, often employing external and independentsupply chain auditors. This involves identifying potential risks, such as natural disasters,supplier failures or market fluctuations, and assessing the impact on different aspects ofthe supply chain, such as inventory levels, lead times and customer service. By analyzingthe outcome and performance under these potential circ*mstances, organizations can identifyvulnerabilities, bottlenecks and areas for improvement. This process helps organizationsproactively address weaknesses, enhance resilience and develop contingency plans to mitigaterisks, creating a more resilient supply chain.
