Disruptions in Today's Economy: How Can Supply Chains Prepare?
How can we better prepare to minimize the risks that disruptions present and mitigate their impact? Here's how to build a more flexible and agile supply chain.
2020 has had a rough start. With COVID-19, we've seen firsthand the domino effect of disruption on global supply chains. And we know similar risks are posed by natural disasters like the bushfires in Australia, economic factors like plunging stocks and tariff wars, political disruption like Crimea and Ukraine, and labor factors like driver shortages. These events confirm how interconnected we all are—regardless of geography.
While it's difficult to predict the short- and long-term impacts of these types of supply chain disruptions, we can learn from the impacts of past events (SARS outbreak, Hurricane Katrina, the earthquake and tsunami in Japan, Brexit, etc.) to better prepare for future events and build contingency plans—especially as we recognize disruptions of all types seem to be happening more frequently.
Most companies' supply chains operate very lean today, and it makes them more vulnerable to disruptions.
How can we better prepare to minimize the risks that disruptions present and mitigate their impact on our supply chains? How can we make supply chains more dynamic in order to respond to changes such as a loss of supplier or a logistics service provider? Regardless of your business or vertical, there are ways to build a more flexible and agile supply chain:
Planning and Preparation through Simulation
Strategic planning, simulations, and optimization exercises should identify and evaluate contingencies IF needed so they can be implemented WHEN needed.
Building various types of disruption scenarios into supply chain modeling is key—especially when needing to identify routes for carriers outside your preferred network, reposition inventories of available resources/product, or reallocate limited or constrained capacities.
Practicing contingency responses provides perspective and the ability to make informed, data-based decisions—not reactive ones. The ability to perform strategic, tactical, and dynamic planning using real-time, current-state data is essential to minimizing the impact of disruptions to supply chains.
Responsive Freight Procurement
Responding to supply chain disruptions may require sourcing new carriers. In the case of the coronavirus, China suppliers are impacted. As a result, companies need to rely heavily on secondary suppliers and source transportation accordingly. The ability to build a new preferred carrier network or analyze different modes of transportation is needed to ensure the most cost-effective options are on the table. Spot bidding capabilities allow access to alternate carriers if contracted backup carriers aren't enough to meet current needs.
Supply chain disruptions pose great risks to corporate bottom lines, but can also be used to uncover real opportunities to effectively mitigate the impact of these events. Conducting proper analysis in advance can help companies better prepare for what lies ahead. Is there an over dependence on a finite set of suppliers or carriers? Would near-sourcing or second sourcing a subset cost more but incorporate more resiliency into the supply chain—which could cost less long term?
By building flexibility and balance into supply chains, companies can minimize their vulnerability and lessen the impact of the next challenge we'll face. Don't let the opportunity to learn from current disruptions pass by.