How to Define and Achieve Resilient Supply Chain
The COVID-19 global crisis has revealed how inefficient global resilience supply chain came at the expense of resilience. An unyielding drive for cost competitiveness and increased efficiency have spawned increasingly opaque and complex supply chains over the last two decades. While this increased speed and volume are a positive thing, it also increases the likelihood of system downtime and mistakes leading to high levels of loss. This has implications far beyond supply chain stability; it can cause companies to lose their competitive advantage and impede the path to optimal performance.
The COVID-19 study is an important first step towards greater understanding and, hopefully, improvement of the global supply chain. However, the broader issues of global trade and competitiveness mean that there is a need to take a wider view of what exactly the current problems mean for CO VID 19. How companies in different industries are performing relative to each other is just one of the key issues that must be examined. Furthermore, there are many complex issues which only become clear when a company looks into the larger picture of its global supply chain. The report makes clear that companies must address issues such as waste, environmental impact and internal competencies if they are to improve their overall performance and compete successfully.
One of the key factors behind increased instability is the increasing number of trade and economic risks. According to the CO VID-19 report, increased risks at the front end of the supply chain have contributed to the increase in global volatility. The report finds that companies tend to avoid taking on new and technically complex projects unless they are well-understood and could cope with the unexpected. In addition, the increasing number of trade and economic risks mean that suppliers have become a more important part of a company’s operations. In the past, suppliers were only needed when a project was too complicated and beyond the capability of the company holding the contract; however, the increasing complexity and risk of the project delivery have meant that companies cannot avoid suppliers altogether.
The process of establishing a resilient supply chain can lead to increased productivity. It will also help reduce costs and shorten cycle times for all business processes, leading to increased levels of profitability. One of the key drivers behind increased productivity is increased lead time. The term ‘lead time’ refers to the time spent to find a supplier of raw materials and making a decision to commit to that supplier – if the potential supplier is not available within the specified lead time, a company would need to find another supplier, causing increased levels of interruption for employees.
Another driver of increased productivity and shortened cycle times are customer demand. The term ‘customer demand’ refers to the level of demand that arises from the customer’s information, and application preferences, rather than a direct effect of supplier capabilities or pricing. If this information was not available in prior decisions regarding where to source, the effect of this would be to create a higher level of customer demand and therefore cause a greater level of interruption. By developing a robust and flexible supply chain, companies are able to better deal with unexpected demand, thereby reducing the risks associated with failed sourcing relationships.
Companies that establish a resilient supply chain can also experience fewer disruptions in relation to their supply chain, as they can more easily adapt to changes in both technology and customer demand. Being able to react quickly to these changes means that companies are not necessarily operating in a vacuum; they are instead operating in a ‘waves’ approach, operating within a range of parameters that can often be adjusted to accommodate a particular problem (for example, if a certain process is proving to be slow, it may be necessary to improve the infrastructure of the processing unit to increase throughput). The use of technology to create a resilient supply chain also means that companies are often better able to take advantage of the elasticity provided by the Internet, in terms of globalizing their internal processes. In the case of an internet outage, this would allow a company to quickly adjust their processes in order to remain competitive in their market.
It is important that we consider not just the potential threats that can result from a disruption in our supply networks, but the opportunities that can result from creating a resilient supply chain as well. By avoiding disruptive outages, one can dramatically reduce the risk of long-term inefficiencies in the delivery of goods. By operating at a proactive rather than reactive pace, we can avoid wasting resources that could have been put to better use. In addition, having a more flexible supply network allows us to respond quickly to fluctuations in the market that might affect the speed and frequency of our delivery. In essence, being able to meet customers half way is often more cost effective than delivering goods that require the whole process to be completed at full speed.
Finally, when we look at supply chains that are more resilient, we are generally looking at processes that involve a greater degree of flexibility. These include processes that involve meeting the demands of a rapidly changing marketplace, where we must make do with the information that is available to us. For example, this might mean that we are taking a more practical approach to procurement. In this case, a flexible supply chain can be a blessing – it means that the requirements of a particular customer might change over time, and so they would need to change our procurement practices accordingly. Similarly, changes in the climate can affect the speed of our delivery. This might mean that we are required to take a more flexible approach, in terms of both our sourcing and our procurement practices.
