A resilient supply chain is a key element of your business continuity and disaster recovery planning. Without one, your company won't be able to maintain, or quickly resume, operations after major interruptions.
There are several steps you can take to build supply chain resilience in your business. Read on for our top strategies to help you build resilience in your end-to-end supply chain:
What Is Supply Chain Resilience?
Supply chain resilience describes the ability of a business to avoid, withstand, and recover from disruptions in its supply chain, whether they're caused by natural disasters, cyberattacks, geopolitical unrest, or, you know, a global pandemic. A resilient supply chain can adapt to changing conditions and still function effectively.
There are many factors that contribute to supply chain resilience, including having a robust network of suppliers, a diverse supplier base, good communication and coordination among supply chain partners, and effective risk management processes.
Building supply chain resiliency should always be a vital step for businesses. It helps them avoid or minimize a disruption's effects on operations and their bottom line.
Why Supply Chain Resilience Is a Big Deal
The world is becoming increasingly uncertain, which means your organization needs to be prepared for anything. Disruptions like the ones we'll describe can come from anywhere and at any time to wreak havoc on your business ecosystem.
The unprecedented events of the last few years have brought supply chain disruptions to businesses the world over, exposing how woefully unprepared they were. In 2021, the Suez canal blockage was estimated to have affected global supply chains by delaying $9.6 billion worth of goods shipments each day it was blocked — around $400 million every hour — and its effects lasted for months.
In the fallout from the COVID-19 pandemic, inflationary pressures have made everything much more expensive and harder to reach. But businesses that have learned from previous mistakes and prepared for this have bounced back quickly.
Building a resilient supply chain can be a complex challenge, but it's becoming more and more important for businesses of all sizes. By taking steps to make your supply chain more resilient, you can protect your business from major disruptions and keep your operations running smoothly.
Tangible Benefits of a Resilient Supply Chain
Building resilience and sustainability in your company’s value chain is not just about protecting your bottom line. It's about being open to change and staying competitive, no matter what happens in your industry or around the world.
Businesses with a scalable and flexible approach to their supply chains will adapt more quickly to change. They can also more easily take advantage of new opportunities as they arise and remain profitable throughout turbulent times. These same initiatives can also protect workers and provide mitigation for the risks associated with a disrupted supply chain.
Here are a few other tangible benefits of supply chain resilience:
1. Decreased Costs
This is the most obvious benefit, but it’s worth saying: Supply chain resiliency helps your business avoid unnecessary costs and losses.
Diversifying your supply chain sources and keeping a close eye on your third-party risks can significantly reduce the likelihood of external disruption. This helps lower the cost of doing business in the long run and increases profits for your company.
2. Reduced Third-party Risks
Strong relationships with your vendors and suppliers can help you identify potential problems in advance and resolve them before they cause major issues for your business.
A third-party lifecycle management tool like Certa will make it easy to keep track of your suppliers and vendors, address their risk factors, and tell them what's needed to improve their performance. This way, you can work together to make your supply chain more sustainable in the long run.
3. Better Productivity
Proper planning and productivity go hand-in-hand for supply chain risk management. Having a more resilient supply chain means your team won't have to contend with stressors of poor planning and ineffective communication that can negatively affect morale during challenging times.
4. More Flexibility
Apart from negative disruptive events, agile and responsive supply chain management processes can help you respond quickly to changes in demand and take advantage of new market opportunities more easily than your competitors can.
The ability to change course and adjust forecasting for production plans is a key element of supply chain management that can help you become more agile over time — especially if you take steps today to build that flexibility into your process.
5. Better Control Over Operational Processes
The more control and visibility you have over your operations, the more effective you can be at managing risk, reducing redundancies, and controlling costs. When you can identify potential problems before they happen and take proactive steps to mitigate those risks, you can increase the chances that they won't happen at all — even if something unexpected occurs in the short-term.
Stuff happens. But proactive risk management is the best way to ensure that your operations stay on track anyway.
5 Ways to Make Your Supply Chain More Resilient
We've said it before and we'll say it again: Building supply chain resilience isn't only about protecting your bottom line. It is about being able to adapt to change and remain competitive in times of uncertainty.
There are many unique factors you and your leadership team will need to consider when growing your organization's supply chain resilience. To get you started, here are the five strategies that should be at the core of your plans:
- Understand your third-party risks: If you don't have the right tools to give you a good oversight on the third-party risks affecting your supply chain operations, service providers, and customers, you won't be able to anticipate the issues that might occur. Use effective risk assessments to understand who you're working with, then integrate that data into your business continuity planning. And remember — risk levels change, making continuous monitoring is key.
- Increase your supplier diversity: Concentration risk will open up your business to avoidable vulnerabilities. Minimize this risk by reducing your dependency on a small group of vendors and diversifying your partnerships — this will smooth out the bumps in your operations if a vendor or supplier experiences a problem.
- Strengthen your third-party relationships: Get the most out of the vendors and suppliers you already work with by strengthening your supplier relationship management strategy. A strong network will help you maintain operations during crises and allow you to work more efficiently as opportunities arise.
- Rethink your procurement strategies: Developing more flexible procurement strategies, like working with resilient suppliers and negotiating adjustable contract terms, will allow you to respond to changes in demand more quickly and give you more options when responding to situations beyond your control.
- Implement the right technology: Technology is constantly evolving, with fresh developments in artificial intelligence, machine learning, and robotics giving you new ways to strengthen your resilience. In today's business world, investing in the right technology is the only way to stay on top of changes in your industry and help you manage potential issues before they happen.
Building a resilient supply chain strategy is critical to the success of your value chain. By taking the time to understand your supply chain and develop strong relationships with your key stakeholders, you make sure your company can weather any storm.