Supply chain disruption is unavoidable. Whether it be a planned event – like seasonal peaks or business growth – or an unplanned event, like natural disasters or global crises. The COVID-19 pandemic shed light on previously identified pain points and unearthed new ones. Shortages of crucial materials for products has threatened enterprises globally, leading to unprecedented wait times across industries for consumers to get their hands on desired products. Companies are now adjusting their manufacturing and distribution footprint to provide “near shore” options to mitigate the risk of not being able to get product if the world were to shut down again.
Whereas supply chain was many times a low priority and often an underfunded part of an organization, the C-suites of most organizations today have prioritized supply chain resiliency ahead of sales and marketing. Businesses are realizing that when supply chain challenges stall production of goods and delay getting those to other business or consumers, it can cause a severe financial impact that can perpetuate for years to come.
What is supply chain agility and resilience?
Restoring lost resiliency in the supply chain is crucial when disruptions hit. Businesses need to be both agile and resilient to successfully mitigate the risk of disruption. Supply chain agility is the ability to send and respond to unanticipated changes in demand or supply quickly, without sacrificing cost or quality. Supply chain resilience is the ability to adapt to structural changes by modifying supply chain strategies, products and technologies.
Accurate information and detailed forecasts of your inventory can help resilient companies overcome disruptions and find opportunities to benefit from difficulties. In order to be resilient in the face of disruption, businesses should be able to examine supply chain information well. It is imperative to read the warning signs correctly, understand the consequences of acting indecisively, and decide the best way to restore lost resiliency.
3 roadblocks to resilience
1. Think beyond the supply chain
Supply chain professionals tend to consider resilience as merely a problem of their area of expertise. While it leads the issue of resilience, its important to note it cannot be done by supply chain alone. Resilience is achieved through the work of the entire organization. By mobilizing all functions of your company, resilience is less of a buzzword and more of an achievable goal.
Internal siloes and poor communication of data can impair visibility, ultimately leading to negatively affecting a company’s ability to detect emerging threats.
2. Scattered data in disconnected systems
Rapid advancement of technology has led to businesses collecting an onslaught of systems to address individual problems as they arise. One new system turns into ten— all operating independently in the blink of an eye. Initially intended to fix a previous operation pain point, disparate, non-integrated software inevitably causes redundancies and inefficiency – only adding to the original issue.
Multiple systems cannot share information or update synchronously without integration, requiring manual entry of data. Confusion and mistakes are likely when relevant data is scattered throughout disconnected systems, making it harder to achieve an agile and resilient supply chain network. The “source of truth” is often difficult to discern given the chaos that is introduced with the multitude of systems and lack of integration.
3. Lack of visibility
A common hindrance in the pursuit of agility and resilience is having limited visibility into your supply chain. In a McKinsey & Company survey, nearly 80 percent of supply chain executives said they need to improve and invest in digital planning to increase supply chain visibility.
Additionally, the Association for Supply Chain Management (ASCM) commissioned a new report from the Economist Intelligence Unit (EIU), which claims more than half of companies lack end-to-end visibility in their supply chains. This leaves them vulnerable to unexpected risks.
In order to consider the bigger picture, businesses should aim to achieve multi-tier transparency. Most only have visibility into their first-tier suppliers because they have a direct contract with them. With a single vertical focus, they see symptoms of the problem, not the source. In order to find the root of a problem, companies need to have visibility in their first, second, third, fourth and fifth tier suppliers. Creating trust among multitier level partners can help businesses create an early-warning system when disruptions arise.
In 2023, companies are looking to prioritize resiliency in their supply chain operations. Many are in the early stages, brainstorming exactly what this looks like for them. By focusing on sustainability, planning and relationship management, companies can optimize their processes to become more agile and resilient.
Want to know more on agility and resilience in the supply chain? Check out Körber Perspectives for a comprehensive look into the current trends contributing to supply chain complexity and performance.