A more sustainable approach is to invest in agile and repeatable processes for supply chain response planning. By working in conjunction with other partners in the supply network, the organization will set itself up to better analyze trends and anticipate disruption, enabling it to take action based on real-time information.
Some investments that can enhance an organization’s ability to respond to supply chain disruption include:
- Increased data sharing: The impact of smaller supply chain disruptions quickly magnifies when faced with a lack of visibility across the end-to-end network. Indeed, the vast majority of data and processes in a supply chain often exists outside of one company’s purview. The secure sharing of data among supply chain partners can minimize the effects of disruption occurring at any link in the supply chain.
- Scenario planning and simulation: By exploring likely types of supply chain disruptions, companies can prepare for and practice effective responses. One approach is building and testing what-if scenarios, prioritizing those aspects of the supply chain that are most likely to be disrupted. Then, companies can set up controls to minimize the consequences of these disruptions. Key areas to explore include risks in supplier networks, labor, manufacturing and logistics. In many cases, these ongoing exercises can expose critical vulnerabilities, allowing companies to plan ahead to avoid problems. For example, a company might allow extra time for delivery whenever its supply is likely to be constrained. Similarly, if a logistics issue is looming, a company might arrange to shift excess capacity to alternate routes by using railways instead of seaports, for example.
- Implementing a supply chain control tower: A supply chain control tower is a central, connected dashboard of real-time supply chain data that serves as a kind of nerve center for monitoring the supply network and coordinating proactive and real-time responses to disruption. In addition to the tower itself, companies often designate a cross-functional team to establish processes and benchmarks that will help identify emerging supply chain trends and anomalies. Companies can then manage responses to any number of disruptions, from cyberthreats and weather events to geopolitical turmoil and supplier performance issues. An effective supply chain control tower offers end-to-end visibility across the supply chain; leverages advanced technologies, such as artificial intelligence (AI), to analyze incoming data; and provides actionable insights.
- Reevaluating lean approaches: While a just in time inventory strategy can be a cost-effective approach in certain circumstances, it can also increase the likelihood of supply chain disruptions. Lack of inventory can prove problematic, particularly in situations where entire regions or sources of supply are affected, which is exactly what occurred during the pandemic. Analyzing and categorizing suppliers, with an emphasis on their importance to business performance, is a good first step. Then, companies can mitigate their risks by recalculating inventory targets, investing in more safety stock, situating inventory supplies closer to customers, identifying alternate suppliers and redesigning networks.
- Designating a resilience team: Granted, the supply chain control tower approach helps with emergent issues, but organizations can further benefit from creating a team devoted to increasing long-term supply chain agility and resilience. Freeing this team from having to handle day-to-day issues can empower employees to plan more fundamental changes related to managing the company’s supply chain.