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For the past few years, the COVID-19 pandemic and other major disruptions have been putting global supply chains to the test. While it’s safe to assume that most organizations have learned some valuable lessons about the fragility of their supply chains, the road ahead is not always clear.
To achieve stability in today’s volatile world, supply chain leaders cannot afford to continue doing business as they always have. Here are six tips for building a robust and resilient supply chain.
1. Overhaul Your Warehousing Strategy
It’s no longer viable for businesses to limit their warehousing strategy to establishing huge centralized facilities. It often takes too long to get products to the end customer on a good day, let alone when further disruptions occur to impact the smooth running of the supply chain.
The rise of e-commerce in recent years means that consumers have grown accustomed to receiving their orders quickly and seamlessly — an expectation that businesses could meet by leasing several smaller regional fulfillment centers.
However, it’s also vital to address the fact that smaller warehouses have less capacity to hold excess inventory and are typically more expensive to run.
Developing an effective warehouse strategy means striking the balance between meeting customer demands for next-day (or same-day) delivery, holding enough stock to prepare for disruption and changes in consumer spending, and navigating rising warehousing costs. Indeed, a report released by real-estate firm CBRE Group Inc at the end of last year found that the rental rates on expiring multi-year warehouses leases are up by an average of 25%.
2. Optimize Your Transportation Strategy
Disruptions such as rising supply chain costs, shipping delays, port closures, and tighter border regulations have highlighted the importance of optimizing shipping routes and overall transportation strategies. According to research from Gartner, as many as 76% of supply chain professionals have experienced disruption in the past few years.
Businesses might be able to mitigate risk, lower costs, and drive efficiencies by reducing the frequency of deliveries, mandating a minimum order size, leveraging fleet management services, and reshoring certain operations. It’s also crucial that supply chain leaders establish robust contingency plans, which identify both alternate suppliers and shipping routes.
3. Invest In Resilience
If the past few years have taught supply chain leaders anything, it’s that the next major global disruption is just around the corner. Research from McKinsey & Co. reveals that 93% of procurement and supply leaders are scrutinizing their supply chains with a view to increasing the resilience of their most critical and high-value networks. But what does building resilience actually entail?
There’s no one-size-fits-all approach to building resiliency in the supply chain. Businesses will need to carry out comprehensive risk analyses to identify weak spots, establish priorities, and take action.
Strategies include, but are not limited to:
- Establishing a new procurement policy
- Eliminating single-source suppliers
- Implementing new processes that monitor high-risk and high-value suppliers
- Consolidating the supply base
- Prioritizing sustainability and diversity initiatives
- Ramping up cybersecurity systems
- Reshoring or onshoring operations
- Increasing inventory
- Developing a preferred supplier program
- Identifying alternate shipping routes
4. Improve Supply Chain Visibility
Research from Forbes revealed that 84% of supply chain leaders believe real-time data has aided them in breaking down silos across the entire value chain, and yet just 6% of organizations claim they have complete supply chain visibility.
Access to real-time data and improved visibility throughout the supply chain enables professionals to accurately measure performance, predict future disruptions, make better-informed decisions, detect anomalies, improve supplier compliance, benchmark operations, and optimize inventory management.
Greater visibility can be achieved via methods such as comprehensive data strategies, supplier KPIs, the adoption of supply chain technologies, and better knowledge sharing between teams.
5. Adopt Supply Chain Technologies
The supply chain profession has not been especially proactive when it comes to technological advancements. Indeed, recent Gartner research reveals that just 1% of world’s supply chain leaders have an extensive digital supply chain system in place.
In a post-COVID and highly disruptive world, digital transformation must become a top priority for supply chain leaders. Game-changing technologies include big data analytics, cloud computing, additive manufacturing (3D printing), IoT, blockchain, virtual reality (VR), augmented reality (AR), artificial intelligence (AI), and machine-learning (ML).
Investing in these technologies will improve visibility, customer satisfaction, efficiency, and competitiveness, as well as provide businesses with opportunities to expand their service offering.
6. Embrace Agility
A recent Supply Chain Dive article, entitled “The Urgency of Supply Chain Agility,” states that achieving agility “comes down to mindset – whether or not your company is proactive or reactive.”
A failure to advance the supply chain by properly considering risk, visibility, the role of technology, and overarching supply chain strategy will leave a business wholly at the mercy of the next disruptive event. Only by addressing each of these factors, and thus abandoning the traditional supply chain, can organizations achieve agility.
Image Credit: Aleksandar Malivuk/Shutterstock.com
