When a single container ship got stuck in the Suez Canal for six days in March 2021, it resulted in a queue of 369 other ships to pass through the canal causing a daily damage to global trade estimated at around 10 billion dollars. (The Effect of the Suez Canal Blockage on Supply Chains, in: Maritime Faculty Journal 2021).
Your supply chain is more fragile than you might think.
Together with the concurring pandemic, the Suez incident underlined the need to build supply chain resilience which has become a critical factor for success. Retailers and manufacturers worldwide are realizing the importance of building robust supply chains that can withstand disruptions and uncertainties.
Below, I will explore the concept of supply chain resilience, its challenges, principles, and provide concrete examples. Additionally, I will suggest some key performance indicators (KPIs) and practical steps for building a resilient supply chain.
What is supply chain resilience?
Supply chain resilience is the ability of a supply chain to anticipate, prepare for, respond to and recover from disruptions, ensuring continuous operation and minimizing the impact on stakeholders. It involves the capacity to adapt to changing conditions, absorb shocks and maintain functionality despite challenges.
Challenges of supply chain resilience
Several challenges impede the development of a resilient supply chain, including globalization, natural disasters, geopolitical issues, demand volatility and technological disruptions. Companies must navigate these challenges to ensure the uninterrupted flow of goods and services.
To do so, they can apply the five principles of supply chain resilience:
- Visibility: Establish transparency across the supply chain to identify potential risks and disruptions, including 360-degree views of first, second and third tier suppliers.
- Flexibility: Build agile processes and operations that can quickly adapt to changes and uncertainties.
- Collaboration: Cultivate strong relationships with suppliers, partners and stakeholders to enhance communication and cooperation.
- Redundancy: Create alternative sources and redundant systems to mitigate the impact of disruptions.
- Risk management: Implement robust risk assessment and management strategies to proactively address potential threats.
Watch this deep-dive webinar on supply chain challenges (Pandemic, Inflation, Energy Crisis – Supply Chain in Focus), with Dr. Daniel Lin, Associate Dean of Faculty Excellence, Innovation and Learning Design; Professor of Operations and Business Analytics, University of San Diego, and Ajay Bohra, Principal Business Consultant, Ocado Retail Business.
Hosted by Brian Cluster, Director of Industry, Stibo Systems.
Examples of supply chain resilience
During the COVID-19 pandemic, companies with resilient supply chains adapted swiftly. For instance, manufacturers of fast-moving consumer goods (FMCG) with a large portion of restaurants in their customer portfolio needed to collaborate with their suppliers to shift packaging sizes to accommodate private households.
Also, pharmaceutical companies diversified their suppliers, implemented digital technologies for real-time monitoring and collaborated closely with logistics partners to ensure the timely delivery of critical medical supplies.
A supermarket chain in New Zealand uses location data management to maintain a detailed map of supplier, customer and product locations. The precise geographical insight facilitates timely deliveries and informed stock decisions to enable drop shipping in New Zealand's complex two-island geography.
A global restaurant chain uses a combination of supplier data management and product information management to create end-to-end transparency. All stakeholders in the supply chain can leverage a single source of truth to get access to the information they need when they need it. The supply team is immediately notified about disruptions or changes in the supply chain, so they can onboard new suppliers to ensure that the impacted restaurants don’t run out of supplies.
Building supply chain resilience
To build a resilient supply chain requires some strategic considerations to some strategic actions, such as:
Conduct risk assessment: Identify potential risks and vulnerabilities within the supply chain. This encompasses a 360-degree view of your suppliers, including their financial position, sustainability credentials and locations.
Implement supply chain diversification: Avoid reliance on a single supplier or geographic location, diversifying sources and manufacturing facilities.
Integrate technology: Implement technologies that can help you maintain 360-degree supplier views and easily onboard new suppliers.
KPIs for supply chain resilience
In order to measure success in building supply chain resilience, you need to have some key performance indicators (KPIs). The ones below are simply suggestions.
There can not be fit-for-all KPIs as they must align with your business strategy:
- Lead time: The time it takes to fulfill an order from initiation to delivery.
- Inventory turnover: The rate at which inventory is replenished and utilized.
- Supplier performance: Evaluating the reliability and responsiveness of suppliers, including order fill rate which links supplier performance directly to the following point:
- Customer satisfaction: Assessing customer experience during disruptions.
Harnessing supplier data
Underneath these examples, actions and KPIs lies data. Supply chain resilience is the result of a data-driven strategy where data gives you insight into suppliers, locations, products and assets.
When you collect data, you need to manage it in a way that makes it insightful and actionable.
Your data must provide answers to questions, such as:
- “Do we have adequate duplicate suppliers for our signature, high volume items?” (top 10% items)
- “Which suppliers meet your sustainability or safety criteria?”
- “Which alternative products can you offer based on similar specifications?” and
- “Which dealers can source products from alternative locations?”
Obviously, accurate supplier data is crucial. Governance of supplier data enables you to quickly approve and ensure supplier quality and performance.
Complete and accurate supplier data, including contract information, help build a 360° view of your supplier network. This enables you to track spending, SLAs, contact information, compliance and solvency information. Integrating your master data management solution with third-party validation sources, such as Dun & Bradstreet, Experian and Loqate, ensures that you have always updated supplier information.
Achieving Supply Chain Transparency with Supplier Data
Let's have a look at how to develop a resilient supply chain. These three steps can help you developing a resilient supply chain:
- Collaborative planning: Foster collaboration with suppliers, customers and stakeholders to create a unified response strategy. This may include educating suppliers on how to prepare data for your item onboarding, so you keep a unified data model across a diverse range of suppliers.
- Continuous monitoring: Implement monitoring systems for real-time visibility into the entire supply chain, enabling quick response to disruptions. This may include IoT technology and robotic process automation (RPA) to integrate data from sensors and machines. This allows databases and systems to be updated in real time so that decision-makers have access to accurate and up-to-date information. However, monitoring systems alone are not sufficient to ensure trusted analytics. IoT and RPA devices generate vast amounts of volatile data. To harness that data and make it useable across departments, a platform to store and govern data in a generalized and unified manner is needed. According to Gartner only 32% of the digital supply chain roadmaps that do exist are aligned under a single governance process and to common business goals. (Gartner: Supply Chain Technologies and Digital Transformation).
- Scenario planning: Develop and test various scenarios to identify potential risks and refine response strategies. Do your suppliers’ SLAs actually meet your criteria? Are you able to compare the quality of two similar products? Does your supplier have the agility to change production conditions or packaging sizes?
- Co-developing a resilient supply chain. Just as you depend on continuous supply, your supplier is dependent on continuous demand. There is a common interest in developing long-term contracts, secure logistic routes and a seamless flow of data.
Building supply chain resilience is an ongoing process that requires strategic planning, collaboration and the integration of advanced data management technologies. Especially, collaborative sharing of data in a unified format with vendors and suppliers can help tremendously to make the right decisions.
