A recent survey found that 87% of supply chain professionals plan to invest
in resilience in the near future, which is no surprise given
the amount of global events which have shocked supply chains
recently. Political turmoil, a pandemic, and an increase in natural
disasters have disrupted business operations to the point that many
executives are shifting away from a “just in time” supply
chain strategy to a “just in case” approach instead.
In order to increase the strength of your supply chain while
also maintaining a streamlined operation you’ll need a fresh
perspective, detailed operations map, data-based models, emergency
plans, and perhaps some new partners – just to name a few.
Learn more about how to build a supply chain better suited to
today’s uncertain environment.
Identify Supply Chain Problem Points
The first step in building resilience into your supply chain is
to take a fresh look at your system and identify problem areas.
Something as simple as a communications breakdown between
manufacturers and assemblers could be slowing down operations; a
quick update of your inventory data could highlight weak points in
your process.
In our decades of experience, we’ve noticed that some of the
most common supply chain issues are value and risk – problems
that have always plagued supply chain managers and are even more
pronounced in today’s volatile business environment. Bringing
in a third party to assess your supply chain against today’s
competitive business environment can result in new approaches to
resolve these issues for a more secure, streamlined operation.
Seek Onshore and Nearshore Suppliers
Today’s global economy makes it easy to connect with
partners across the world – but that doesn’t necessarily
mean that going global is the right approach for every problem. A
recent study found that more than half of business executives
listed insufficiently localized supply chains as a
moderate to major risk to their operations.
While offshore vendors may provide opportunities to cut costs or
boost efficiencies, their increased distance may also equal
increased risk. Given the recent rise in global uncertainty, many
organizations are balancing risk by broadening sources and pivoting
to onshore and nearshore suppliers. By doing so, they’re
reducing risk by simply cutting down on time, distance, and border
crossings.
Make Change Outside the Chain
Although supply chain experts may be balancing their focus to
include nearby vendors, they’re simultaneously expanding their
perspective on what the typical supply chain entails. In addition
to overseeing basic supply chain components like warehousing and
distribution, logistics professionals today are increasingly
involved in sales, operations, marketing, and even product
development. All of these departments can impact a supply chain and
modern technology allows managers to quickly “connect the
dots” between parts of an organization to better identify risk
points. With a more holistic view of operations, managers can make
informed decisions, prevent bottlenecks, and build resilience into
their supply chain from the start.
For example, we have experience working with a fast-moving
consumer goods manufacturer supplying a major retailer that had
begun levying significant fines on suppliers for not delivering
orders on time and in full (OTIF). This manufacturer was
experiencing high levels of fines from the retailer and reduced
sales (20% of orders that were unable to be filled were going to
competitors) due to having insufficient inventory to meet the
retailer’s demands.
We approached this problem in two phases. First, we implemented
a simple, low-cost change: move the manufacturer’s delivery
date up by one day. This quick fix immediately reduced fines. The
second part of our solution was conducting a detailed analysis to
identify problem SKUs – products that were often out of stock
due to unpredictability of the retailer’s ordering habits as
well as the unpredictability of raw material supply. We
incrementally boosted inventory levels for these SKUs and measured
performance.
Over the next few months, we found that delivery performance and
sales significantly increased for this retailer and fines dropped
markedly. Furthermore, our cost/benefit analysis showed that the
added cost of the inventory was well worth it to avoid the fines
and loss of sales that would have otherwise occurred.
Plan Ahead with Predictive Modeling
Pivoting to a “just in case” supply chain comes with
costs; fortunately, predictive modeling tools can help companies
optimize their investment. “Digital twinning” allows
executives to simulate different supply chain scenarios without
actually implementing them on the ground, therefore identifying
weak spots before they arise. This strategic approach, used by
leading supply chain companies such as Toyota, helps companies keep their supply
chains lean yet secure.
Expect Disruption
Global uncertainty has reached new highs in
the past few years due to events such as COVID, Brexit, U.S.-China
trade tensions, and the war in Ukraine. Additionally, a surge in natural disasters and other weather
events means that executives operating supply chains on a global
scale should be prepared for disruption.
Preparing for unplanned events is obviously no easy task;
that’s why it’s important to map out your entire supply chain and have an
emergency plan to keep things moving along during a shock. An
emergency plan could include everything from simply increasing
stockpiles of inexpensive, easy-to-store materials during periods
of stress to the creation of standby capability agreements or inventory
allocation agreements allowing companies to co-produce or obtain
similar products during times of industry-wide uncertainty. Taking
the next step to make your supply chain remain lean yet stay secure
can be challenging for executives simply trying to keep up with
volume and intensity of change in today’s market.
Consider Outside Perspective
An outside perspective from a third party can often help you see
what you can’t see. At times, an expert with a fresh point of
view may be able to assess your current challenges and priorities,
analyze relevant company information, apply benchmark data, and
clarify the critical few actions to take precedence now to move the
needle. To learn more about creating an operation that’s built
to endure the unexpected, and to move on critical supply chain
priorities quickly, get in touch with Ankura’s Transformation group.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
