There is growing awareness that supply chains need to be more agile and flexible to be able to react and quickly adapt to potential disruptions. The ability of a supply chain to both resist disruptions and recover operation capability after the disruption is called supply chain resilience. It is also one of the proactive strategies through which companies use to alter their supply chain according to the changing demand in order to remain in competition.
Covid-19 pandemic led to a devastating global disruption which Shon light into the weakness and the vulnerabilities in the global supply chains hence the need for change in supply chains. The obstacles that came with it however, provided an opportunity for organizations to build a more resilient, flexible and agile supply chain that is ready to withstand future disruption and global crises.
Lets look at the component of resilience:
Recovery
Recovery is the supply chain’s ability to return to full operations once a disruption has occurred. The part of supply chain resilience is characterized by the stabilization phase after which a return to a steady-state of performance can be achieved. Once recovery is complete, firms will often take time to learn from their experience to help in future planning and supply chain risk management strategy.
Resistance
Resistance is the supply chain’s ability to minimize the impact of disruptions that jeopardize the supply chain to perform effectively and efficiently. This activities include man-made disasters and natural disaster. Resistance gives a good indication of how prepared is a supply chain to predict and minimize the impact of any disruption.
For example, One of the most famous supply chain resilience examples happened in Japan following the 2011 earthquake and tsunami. In the wake of these twin disasters, it quickly became clear that suppliers for both Nissan and Toyota were struggling to cope with the shock. Nissan quickly built an alternative supplier network and was able to resume operations and regain lost market share much faster than Toyota. For its part, Toyota learned the lesson of resilience and was able to recover much more effectively when disaster hit again in 2016.
so how can you make your supply chain more resilient to whatever comes on its way?. The following are strategies for supply chain resilience according to Gartner
Buffer capacity is the most easiest way to enhance resilience, whether in the form of underutilized production facilities or inventory in excess of safety stock requirements. The challenge is that buffers are expensive, and supply chain leaders may have a hard time justifying them to the C-suite.
Leading companies use buffers in the form of surge capacity for new product launches or expansions into new growth areas. Organizations can also create buffer capacity by using contract manufacturers strategically for their surge needs.
2: Manufacturing network diversification
In response to the U.S.-China trade war, many companies have begun to diversify their sourcing or manufacturing bases. For some, this has meant switching to new suppliers outside China, or asking existing partners to supply them from elsewhere in Asia or in countries such as Mexico.
“Disruptions to supply chain operations have intensified in the past few years. This means that the cost of retaining multiple supply locations must be seen more as a cost of doing business, rather than an inefficiency".
3: Multisourcing
In 2011, major natural disasters in Japan and Thailand disrupted supply chains across the world and exposed companies’ reliance on single sources of supply. In the automotive industry, nearly finished cars could not be shipped to customers because of missing, and often inexpensive, components. Multisourcing is an obvious way to mitigate this risk.
To craft a multisourcing strategy, supply chain leaders must know their supplier networks in detail and be able to categorize suppliers not just by spend, but also by revenue impact if a disruptive event occurs. Diversification can be achieved by awarding business to additional suppliers or working with an existing single- or sole-source supplier that is able to produce out of several locations.
4: Nearshoring
Beyond multisourcing, some companies want to reduce geographic dependence in their global networks and shorten cycle times for finished products. Regional or local supply chains can be more expensive, because they add more players and complexity to the ecosystem, but they allow for more control over inventory and move the product closer to the end consumer.
5: Platform, product or plant harmonization
The more regionalized the network, the more harmonized plant technology has to be to allow products to move seamlessly across the network. The use of common vehicle platforms for a variety of models in the automotive industry is one well-established example of such harmonization.
Standardizing components across multiple products — particularly those that are not visible or important to the customer — is another form of harmonization. This simplifies sourcing policies and creates opportunities to place higher volumes among multiple suppliers, which in turn enhances resiliency.
6: Ecosystem partnerships
The COVID-19 crisis has shown the need to have a diversified approach to sourcing. At the same time, however, collaboration with strategic raw material suppliers and external service partners is also vital to ensure better preparedness and resilience for the future. For companies without the scale to support multiple locations on their own, strong relationships with contract manufacturers and global 3PLs can be vital in diversifying production and distribution to different countries.
