In recent years, global supply chain networks have been faced with an increasing number of disruptions, including natural disasters, trade disputes, labor shortages, and recently a worldwide pandemic.
These unforeseen challenges have forced organizations to evaluate their ability to maintain efficient and resilient supply chains. Below, we discuss the impact of supply chain disruptions on businesses and explore strategies to mitigate risks and better prepare for future challenges.
The COVID-19 pandemic has highlighted the vulnerability and interconnectedness of global supply chains. Lockdowns and travel restrictions brought entire industries to a halt, underlining the reliance on international networks for critical raw materials and components. As a result, many companies found themselves grappling with unprecedented inventory shortages, production delays, and transportation chaos.
When a disruption occurs, the ripple effects can be felt across the entire supply chain network; suppliers may face material shortages or struggle to meet delivery timelines; manufacturers may need to halt their production processes due to a lack of components; retailers may experience demand fluctuations and struggle to fulfill consumer expectations.
To navigate through these disruptions and build more robust supply chains, organizations should consider implementing the following strategies:
- Diversify Your Supplier Network
Relying on a single supplier can leave your business vulnerable in the event that supplier experiences a disruption. Instead, build relationships with multiple suppliers from diverse geographical locations. This will not only reduce the risk of delays due to an issue with one supplier but also provide you with alternative options if you need to adjust your procurement strategy.
When initially choosing your company’s supplier, the research you had to do into alternative options was broad. It may be easy to turn back to the research you’ve done in the past to choose a supplier that fits into your strategy as a Plan B, or even an additional production partner in the short term despite any happenings with your primary partner.
- ‘Just-In-Time’ Inventory Management
Managing inventory levels is crucial when dealing with potential supply disruptions.
Adopting a just-in-time (JIT) inventory approach can help ensure you have enough stock on hand while reducing inventory holding costs. JIT focuses on ordering and receiving inventory only when it’s needed for production or sales. By monitoring demand patterns and lead times closely, you can minimize overstocking and better manage potential disruptions.
Overstocking can be one of the most detrimental mistakes a business makes. It’s obviously a bad outcome for your company, as you can’t sell all the products on hand to make room for new, more popular products, but it’s also bad for your supply chain relationships.
Supply chains are disrupted when normal shipping patterns are disrupted, and if your company is sitting on thousands of square feet of unsellable goods, manufacturing and production partners won’t be happy, either.
- Invest In Technology and Automation
Emerging technologies like artificial intelligence (AI), machine learning, and the Internet of Things (IoT) can aid in predicting and mitigating supply chain disruptions. For example, AI-based tools can analyze large amounts of data to detect patterns that indicate an upcoming disruption or identify alternative suppliers more quickly when disruptions occur.
This doesn’t mean robots in your factory, and it doesn’t mean laying off humans. The scary ideas about bringing artificial intelligence into factories have turned out mostly to be myths. What it does mean is taking the jobs that are detail-oriented, but repetitive and menial and removing them from the hands of workers who would be more productive and helpful elsewhere.
- Strengthen Collaborative Planning With Suppliers
Building strong relationships with suppliers is critical for managing supply chain turbulence effectively. By collaborating closely with them through formal processes like Sales and Operations Planning (S&OP) meetings or Vendor Managed Inventory (VMI) programs, you can share crucial information about demand forecasts and potential risks, allowing for quicker adjustments when needed.
- Implement a Robust Risk Management Plan
Having a well-structured risk management plan in place will help you identify and respond to supply chain disruptions more effectively. Regularly assess your supply chain for vulnerabilities, such as sole-sourced items or dependencies on specific transportation modes or routes.
Create contingency plans for high-risk areas, including identifying alternative suppliers, backup transportation routes, or supplemental manufacturing capacity.
This means that included in the supply chain are things that don’t seem to relate at all, like insurance. Insuring your relationship with your manufacturer and all of the products that come out of it is an important step to security in times of risk.
- Foster Supply Chain Visibility
Gaining end-to-end visibility into your supply chain is crucial for detecting and mitigating disruptions before they impact your operations. Build partnerships with suppliers and logistics providers that champion transparency and make use of real-time data to give you a clear view of inventory levels, production schedules, transportation plans, and potential risks at all stages of the supply chain.
Artificial intelligence can play a part in supply chain visibility, as well. Many AI programs exist that automate areas like scheduling, transportation planning, and payment. Diving into the world of artificial intelligence could have a plethora of benefits for your company.
Supply chain disruptions may be unavoidable in the interconnected world of business, but implementing foolproof strategies will enable your business to sidestep their impacts better by proactively creating a way to deal with them. These six strategies are simply a piece of the pie; any shoring up of your supply chain uncertainties is a step in the right direction.