Strategies for supply chain resilience
Despite growing global disruptions, only 21% of global businesses have resilient supply chain networks. A majority of businesses lack end-to-end visibility of their supply chains and the ability to shift vendors, manufacturing, and distribution quickly. The 2011 tsunami in Japan and floods in Thailand, the 2018 multilayer ceramic capacitor shortage, the 2020 COVID-19 pandemic, and the 2021 semiconductor shortage demonstrated the urgent need for supply chain resilience.
What is supply chain resilience?
Supply chain resilience is a company’s ability and resources to bear the impact of and quickly recover from an event that disrupts normal operations. The company must be able to accomplish this without impacting operations, customers, and timelines. The disrupting event could be as small as a supplier missing out on its delivery timelines or as big as the COVID-19 pandemic that shut down the economies worldwide. Other probable events include factory fire, transportation disruption, political instability, workforce strike, etc.
Core enablers of supply chain resilience
For a lasting impact and to gain maximum benefits from supply chain resilience, a business must focus on the following core enablers.
- People: Companies not only need enough manpower to complete the work but also need skilled workers who can assist employers in tackling challenges. This includes engineers, procurement specialists, and supply chain managers. Additionally, they need to have teams handling commodity management and supplier management.
- Processes: People perform best when they work according to robust processes, including forecasting, inventory management, supplier relationships and sourcing, and market awareness. Forecasting helps in predicting and planning inventory, resulting in a realistic, feasible, and flexible supply chain.
- Technology: Technology works behind the scenes as the driving force that drives people and processes. This includes real-time analytics, decision support tools, electronic data interchange platforms, and AI-based prediction algorithms. Managers use technology to gather enriched data and make data-driven decisions rather than decisions driven by intuition.
Risks for supply chain resilience
By identifying risks to their supply chains in the known and unknown domains, companies can manage and adapt to build a resilient supply chain. The three main categories of risks are:
- Operational risk: Sudden changes and disruptions in the supplier network or delivery infrastructure
- Tactical risk: Miscalculation of supply versus demand and erroneous anticipation of fallout scenarios during sales and operations planning
- Strategic risk: Inadequate supplier sourcing strategy and a lack of network modelling and simulation tools
Supply chain resilience strategies
Studies have revealed that while 94% of companies are aware of and care for supply chain resilience, only 66% have invested in it. Companies must consider the cost of implementing the following strategies as an investment rather than risk inefficiency.
- Capacity and inventory buffer: This is perhaps the most straightforward solution, be it underutilised production facilities or excess inventory. However, maintaining buffer inventory is expensive, and a company must use this strategy only if it foresees a surge in demand or is expanding into new regions.
- Diversification of manufacturing network: Multiple geopolitical factors, military conflicts, and trade wars can jeopardise your supply chains if you source your products from a single country. Diversifying your business in different countries can make your supply chain robust and cost competitive.
- Multi-sourcing: By relying on a single vendor, such as a textile manufacturer in Bangladesh or a semiconductor manufacturer in Taiwan, you risk disruptions in sourcing. In order to avoid such a scenario, businesses should award contracts to multiple vendors.
- Nearshoring: Contrary to global sourcing, some companies prefer to outsource within their country or state. Even if a local supply chain is expensive, it provides more control over inventory and moves the product closer to your business location.
- Platform, plant, or product harmonisation: Having uniform underlying technology or platforms helps reduce costs in the case of regionalised networks. For example, automobile manufacturers use common platforms to build multiple car models, thus reducing costs and enhancing resiliency.
- Ecosystem partnerships: To ensure supply chain resilience, it is vital that companies collaborate with external service partners and strategic raw material suppliers. Companies quickly scale in new locations based on relationships with contract manufacturers and global 3PLs.
For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.
How can Infosys BPM help?
Infosys BPM helps digitise your end-to-end supply chain to mitigate risks and reduce costs. The comprehensive solutions for supply chain resilience include:
- Supply chain diagnostics
- SC shared services advisory
- SC control tower
- Forecasting as a service
- Inventory optimisation
Read more about accessing and improving the health of your supply chain.