The scale of disruption caused by the coronavirus pandemic, along with the impact of Brexit and incidents such as the Suez Canal blockage, have highlighted the strategic importance of effective supply chain management.
It needs to be positioned as a prominent boardroom issue.
As businesses plan for economic recovery, there is an opportunity to learn lessons from these events in order to build a more resilient operating structure.
Recent supply chain shocks have provided a powerful reminder that ignoring the risk of disruption in this area can be costly. For example, according to Lloyd’s List, the Suez Canal blockage held back approximately $9.6bn worth of goods per day.
By taking steps to thoroughly assess, build agility into, and future proof the supply chain, businesses can position themselves for growth and secure a competitive advantage.
Regularly assessing supply chain resilience is important for giving businesses a clearer understanding of their supply base, as well as their distribution and logistics operations, helping them to identify areas of weakness and opportunities to deliver improvements.
Businesses should adopt a three-pronged approach to effectively assess supply chain resilience, covering risk, performance and capability. While risk can prove difficult to assess effectively, poor risk visibility can pose a significant threat to the organisation’s reputation and performance.
Conducting a sensitivity analysis of the entire supply chain based on a number of ‘what if’ scenarios can provide the data needed to increase resilience and drive efficiencies.
A focus on supply chain performance is also vital to determine whether an appropriate balance between cost and value is being struck.
During the pandemic we saw how huge surges in demand created issues across the supply chain, resulting in manufacturers having to make regular adjustments to their supply chain models, and having to maintain production and quality levels at affordable costs for customers.
Capability assessments are also important to check whether the business has the necessary systems and people in place to respond rapidly to issues, such as a sudden spike in demand.
The way in which customers interact with products and services has also changed significantly, and businesses must be able to respond to market demands in an agile way. As well as helping to strengthen top-line growth, building supply chain agility can support growth of market share and deliver a range of structural and operational advantages.
Adopting a multiple sourcing strategy can help businesses to improve their supply chain agility, enabling them to easily switch between suppliers. This means that in the event of supply chain disruption, they can maintain a constant flow of goods. Developing a fully integrated supply chain also provides access to accurate and real-time data, facilitating intelligent decision-making.
The pandemic has accelerated a number of significant trends that businesses must consider, such as the rise of e-commerce, the growth of some Asian economies and global pressure to tackle climate change. The first step to future-proofing supply chains should be to think what products and models of consumption will look like in two, five and 10 years’ time.
In order to create a greener and more sustainable supply chain, businesses will need a detailed view of the entire supply network and knowledge of the environmental impact of every supplier’s operations, from power sources to production methods and transportation. By taking action to become market leaders in sustainability now, businesses can gain a competitive advantage and secure commercial rewards in the future.
As the economy bounces back and the markets worst affected by the pandemic get on the road to recovery, businesses that have remodelled their supply networks with both risks and opportunities in mind could stand to gain an early mover advantage. By assessing their supply chains, building agility into and ensuring their supply chains are future proofed, businesses can position themselves for a more sustainable future.
You can learn more in our white paper.
☛ Paul Cooper is a director and manufacturing sector specialist at top-20 management consultancy Vendigital.