Managing risk reactively is no longer good enough – companies must reduce the number of disruptions they face in the first place by reducing the size of their supply chain, according to a report.
Making your supply chain a smaller target – by cutting physical footprints, reducing suppliers and manufacturing sites, and minimising movements – could reduce exposure to risk events by more than 66%, the report by Gartner said.
Gartner suggested two ways to shrink supply chains in order to minimise risk. Firstly, companies should cut down their physical footprint, reducing the number of suppliers and manufacturing sites. Secondly, movements within the supply chain should be minimised, focusing on fewer processes and shipping lanes.
When making supply chains a smaller target, Gartner emphasised two priorities:
1. Make changes based on competitor vulnerabilities
Expanding where a competitor is limited will help give your business an advantage. By examining trends such as consumer demand for customisation and single-region reliance, companies can evaluate their own and competitors’ exposure to different kinds of disruption.
In cases where your supply chain is more exposed to risk than a competitor’s, Gartner suggested prioritising change.
2. Balance expansion with consolidation
Shrinking supply chains can risk extreme consolidation, however, which might expose you to a single event causing widespread failure. Gartner advised diversifying the portions of your supply chain that drive revenue and consolidating elsewhere.
Companies should only establish new sites and suppliers in areas which diversify risk. This will help by "protecting the portion of its supply chain that provides the majority of the company’s revenue while keeping its supply chain from becoming susceptible to severe risk events".
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