As any supply chain manager who’s been around for a while knows, supply chain disruption is inevitable. COVID-19 significantly disrupted global supply chains in 2020, but before that, there was Brexit and the U.S.-China trade war. Barriers to international trade are going up, countries are trending toward nationalism, weather events are getting more extreme, and supply chains need to be designed with more flexibility to weather the literal and figurative storms ahead. Here’s how to add resilience to your supply chain.
Diversify Sourcing
If you only get raw materials from one source, and then that source dries up for whatever reason, you’re going to have a hard time making your products. You need to know your supplier network and understand the revenue impact of each of your suppliers. You may not be paying very much for an inexpensive, but indispensable, part, but you could experience huge losses in revenue if you can’t get that part – that makes it worth sourcing from multiple suppliers.
Adding multiple sources of the same materials and parts to your network minimizes risk. Further eliminate risk by diversifying the geographical location of your multiple suppliers. That way, you have less exposure to localized risks like natural disasters or civil unrest.
Add Some Buffer Capacity to Your Network
Buffer capacity simply refers to extra resources that your organization is saving for a rainy day. Maybe you have a buffer capacity of extra inventory or vital raw materials in case of a shortage. Maybe you have some unused production facilities or equipment that you’re keeping in case your existing facilities become overwhelmed or somehow damaged.
It can be expensive to stock up on extra materials or pay for extra facilities and equipment that you’re not using, and that’s why many still resist adding buffer capacity to a supply chain. But if having extra inventory or equipment allows you to keep operating normally through a supply chain disruption, it could be worth it.
Shrink Networks with Local Sourcing
That’s not the only reason to go local with your suppliers. Customers really like it, especially these days, as more people are seeing the value of keeping their money within their local community. You might pay a higher upfront cost for local goods and services, but you’ll get higher revenues from a customer base looking to show brand loyalty to companies that reflect their own core values.
Automate Supply Chain Analysis
New demands on the supply chain require logistics professionals to have a new level of visibility into their supply chain networks. You need actual data about things like the average length of your route, the demographic makeup of people who shop at your stores, the distribution of your retail outlets, the amount of time goods spend in transit, and how goods are getting damaged in transit, if they are. This information will help you identify problems before they become a huge, disruptive issue. It can also help you streamline your supply chain for harmonious design and maximum work efficiency.
Cultivate More Partnerships
You need to have a diversified approach to sourcing materials, but it’s not enough to simply get raw materials from two different suppliers. You need to work on getting to know suppliers and other external service vendors, so you can work together to anticipate upcoming issues and plan for future disruptions. Close partnerships with others in the network can add resilience to your supply chain, as you’ll have that many more resources to plan for the future and address sudden changes.
You’re never going to build a supply chain that is completely immune to disruption. You just can’t predict or totally avoid the things that are going to stretch or break the supply chain. But with proper planning and awareness, you can be a company that anticipates supply chain issues and prepares for them accordingly. Resilience in your supply chain could mean the difference between closing your doors forever – or outpacing even your biggest competitors.
