Here’s how manufacturers, distributors, and retailers can shore up their supply chains with an eye on making them more resilient and crisis-proof in 2021 (and beyond).
If there’s one thing the world’s manufacturers, distributors, and retailers learned in 2020, it’s that there’s no such thing as being too prepared to tackle a supply chain crisis. With companies across many sectors still grappling with COVID-related material shortages and the world’s transportation networks struggling to keep up with the demand, there’s no time like the present to make your own supply chain more resilient, agile, and crisis-proof.
“The COVID pandemic caused significant disruption to 80% of supply chains around the world, with the result that nearly half (47%) of supply chain operations will be overhauled,” Kearney reports. “But as dramatic as these figures are, they still understate the size and scope of supply chain challenges.”
Offsetting Severe Disruptions
It didn’t take long for the global pandemic to throw companies around the world into crisis mode. In March of 2020, more than 80% of companies already believed that their organizations would experience some impact due to COVID-19 disruptions; by late-March, that number had grown to 95%, according to Institute for Supply Management (ISM).
“Severe supply chain disruptions were experienced in multiple regions to varying degrees,” ISM reported a few months later, noting that in early-March, 6% of firms reported “severe disruptions” across their supply chains. By the end of March, severe disruptions were being reported in North America (9% for U.S. supply chains, 6% for supply chains elsewhere in North America), Japan and Korea (by 17% of respondents for each), Europe (by 24% of respondents), and particularly China (by 38% of respondents).
5 Steps to Take now
By June 2020, Accenture was reporting that 94% of Fortune 1000 companies were experiencing supply chain disruptions due to the pandemic. “Disruptions to supply chain caused by COVID-19 were unpredictable and devastating, drawing attention to how critical supply chains are to sustaining business success and daily operations,” Supply & Demand Chain Executive (SDC) reports. “Unfortunately, the pandemic has also underscored how vulnerable supply chains are to sudden adversity.”
To help your supply chain better withstand the shocks of a future crisis, consider implementing some or all of these strategies for bolstering resilience:
- Fully leverage connectivity and digitization. “Advancing connectivity with supply chain partners and digitizing information to generate a single version of the truth guarantees that enterprises can inform and cooperate with their entire supply chains to respond in unison,” SDC explains. “Organizations that connect their supply chain partners into a multi-enterprise business network can have access to real-time information, rapid access to capital, and enhanced shipment visibility.”
- Strive for end-to-end visibility. The goal should be to gain insights into every aspect impacting inventory in the supply chain. This includes enterprise-level demand forecasts and purchase orders, cooperation with suppliers to ensure that availability and capacity needs are met and connected or “single-instance” applications of enterprise resource planning systems (ERPs), SDC advises. “This visibility also covers warehouse management across your distribution network, transportation tracking and visibility, in-house and outsourced production and final delivery and settlement.”
- Improve partner collaboration. The lack of communication between trading partners led to a lot of late orders, missed shipments, and understock situations in 2020. It also forced more companies to examine the role that basic exercises like data sharing across supply chain networks can play in the overall health of those networks. “Effective collaboration with partners is critical to supply chain resiliency,” SDC says, noting that early sharing of forecasts and orders is a best practice, whether volatility exists or not.
- Diversify your supply sources. Don’t let your single-source approach become a point of failure in a crisis. Instead, consider alternate supply sources and begin weaving them into your overall procurement plan before disaster strikes. One way to do this is by near-shoring the manufacture of certain components, or you might want to adopt a China plus one policy, whereby most of your production takes place in China while some of it happens in another country. These and other diversification strategies help lessen risk and ensure that you don’t have all of your “eggs in one basket” when the next disruption emerges.
- Build more trust into supply chain processes. There was a time when keeping things “close to the vest” and blocking organizations from obtaining internal data, forecasts, and other information was just a part of doing business. Fast-forward to 2021 and the business landscape basically demands higher levels of trust and transparency across trading partners. This, in turn, helps those partners shield their respective supply chains—and, the ecosystem as a whole—from shocks and disruptions. “Supply chain transparency is one way to enable communication among suppliers,” Symbia Logistics points out. “With open discussions, all parties can tackle issues that impact pricing, quality, and competitiveness. If a supplier is unwilling to share data, a company has to wonder why. What is the supplier trying to hide?”
By implementing some or all of the above points, companies can shore up their domestic and global supply chains and prepare them for the impacts of the next disruption—no matter how big or small that event may be. After all, it doesn’t take a global pandemic to bring a supply chain to its knees and the next interruption could be waiting right around the next corner.
Generix Group North America provides a series of solutions within our Supply Chain Hub product suite to create efficiencies across an entire supply chain. Our solutions are in use around the world and our experience is second-to-none. We invite you to contact us to learn more.