Supply chain resilience: what you should know

Having a resilient supply chain is key to ensuring that risks (such as COVID-19) do not significantly disrupt the business and its ability to supply customers with their products and services. Understanding how to build supply chain resilience can be the difference between a business that survives disruptions and one that doesn’t.

 

The first key to understanding supply chain resilience is understanding what the supply chain is. A supply chain is the full system of people, activities, organizations, and resources that are used to provide a customer with a product or service—from raw materials to the customer’s receipt of the product.

 

Supply chains can be disrupted by any number of factors, including material shortages, shipment delays, cyberattacks, production issues, and more. That’s why it is highly important that businesses understand how their supply chain functions, any possible weaknesses or gaps that it may have, and how it can be optimized and protected.

 

In order to have a resilient supply chain, it must be agile, able to quickly adapt to disruptions, and have built-in safeguards against disruptions.

 

Here are some important steps your business can make to ensure your supply chain is as resilient as possible.

 

Evaluate for weaknesses

Before a supply chain can have resilience, you must first ensure that it doesn’t have any weaknesses. By identifying and resolving any weaknesses, you will be preparing a sturdy foundation for your supply chain and ensuring that those weaknesses are addressed before they become problems.

 

Some weaknesses to look out for include where you receive supplies from, how you receive them, and where they are held/warehoused once received.

 

Understand and plan for all risks

It’s important to understand that risks and disruptions don’t just impact businesses financially—they can also have a reputational or operational impact. The risks themselves can be from a number of different areas, including:

  • Legal
  • Functional
  • Performance
  • Geographical
  • Ethical
  • Governmental
  • Technical

By understanding the different levels of risk, the business will be able to be more prepared in its response.

 

Create a contingency plan

Anticipating potential disruptions and crises is a key step in creating a resilient supply chain. This means that the business must identify disruptions, create a response plan, and run simulations to ensure the business is positioned to quickly and properly respond should those disruptions actually occur. Proactive planning can save businesses from massive failures.

 

Optimize all operations

The business should be optimized across its social, economic, and environmental areas to ensure that all operations and procedures are effective and without weakness:

  • Social: Ensuring that employment practices, training, and safety are all correctly implemented
  • Economic: Ensuring financial robustness, corporate governance, and business continuity
  • Environmental: Ensuring energy consumption, waste management, and sustainability are all monitored for efficiency

Implement security measures

Protect the organization against cyberattacks and theft, both digitally and with physical security. Although preparation can protect the business from some cyber events, not all can be prevented. For that reason, it is also key to have an IT disaster recovery plan in the event that a cyberattack or other digital disruption should occur.

 

Create operational flexibility

For a supply chain with the highest resilience, it’s important to have backup options in the event of a disruption. This can include having a list of backup suppliers, keeping a list of product or material options that are similar to what the business orders but may be different in pricing or quantity, and by creating alternative transportation routes and options. This ensures that issues with the supply chain will not hinder the business in delivering goods and services to customers.

 

It’s also important to prepare for disruptions by ensuring that there is extra inventory of essential items. You can also create buffers by leaving room to add extra time to shipping estimates in the event that shipping may be delayed.

 

Create KPIs to monitor the supply chain

Businesses are able to more quickly catch and respond to supply chain issues when they are tracking and monitoring specific key performance indicators (KPIs). These are metrics that track key numbers for the business, and they are reviewed regularly (daily or weekly). KPIs can be used to track general performance of the supply chain, or they can be designed to specifically measure resilience.

 

By taking the steps listed above, you will be able to ensure that you have a more resilient supply chain and a more resilient business that is able to quickly and effectively respond to threats and disruptions. The longer businesses wait to implement supply chain resilience, the more likely they are to be severely disrupted by events like COVID-19.

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