6 Strategies
Supply chain stagnation has been a big problem for the global economy since COVID-19 burst onto the scene. Businesses in manufacturing and other industries have done their best to tread water while the economy recovers, but progress has been slow and future disruptions could certainly happen.
These six strategies will help businesses prepare for future supply chain disruptions and maintain smooth operations.
1. Maximize Visibility
The simplest way to minimize the impact of future disruptions is by maximizing supply chain visibility. Businesses must be able to identify delays as they arise, which requires constant surveillance along each step. Inventory management software is a must-have for all warehouse and retail operations.
Maintaining visibility gets trickier once the supplies are in the process of shipment or delivery. Internet of Things (IoT) tracking solutions have been extremely helpful in improving transparency across the supply chain. They provide detailed real-time updates on a shipment’s location and condition, helping businesses spot potential disruptions.
IoT tracking solutions also give fleet managers information about each vehicle’s driving patterns and potential mechanical issues, which improves safety and helps drivers avoid delay. Businesses can also establish vehicle-to-vehicle connectivity among their commercial fleets with wireless local area networks (WLANs), equipping drivers with an automatically updated GPS system, park assist and many other helpful features.
All businesses should also have a data backup and recovery system to protect their data from human error, cyberattacks, technical failures and natural disasters. Using new technology is crucial for keeping up with these disruptions. According to a recent survey, 71% of companies are investing in new capabilities to prepare for supply chain disruptions.
2. Perform Regular Vulnerability Assessments
Due to ongoing labor and supply shortages across many industries, a disruption is bound to happen in the near future. Business leaders must know their strengths and weaknesses to determine how a disruption will affect their operations. They must conduct regular vulnerability assessments in each step of the supply chain, from warehouses to vendors to delivery routes.
A quarterly assessment is the standard operating procedure for most industries, but some companies do it monthly or bi-weekly. A vulnerability assessment might also be necessary if the following changes occur:
- A change of supplier
- A change in the supplier’s financial situation
- A change in the supplier’s location
- A change in material costs
- A change in material availability
- A new risk emerges
- A new technology gets introduced to the supply chain
Tracking all of these changes can be difficult. Supplier mapping is a simple way for companies to uncover their blind spots, get more insights and make more accurate vulnerability assessments. Every business should have a comprehensive outline of every location on their supply chain.
3. Create and Practice Contingency Plans
If and when a disruption occurs, every business should have a contingency plan or multiple contingency plans. For example, if a supplier’s factory shuts down, there must be another way to make up for the material losses with other suppliers. If international conflicts arise on an overseas shipment, a reshoring plan might be necessary.
There should be a contingency plan for every serious threat, including a step-by-step protocol and an outline of each department’s responsibilities. The plan must also evolve along with the company’s risk landscape. That’s why recurring vulnerability assessments are so important. Something can change overnight and introduce a new risk.
Contingency plans are the backbone of a company’s risk management program. Supply chain analysts predict that risk management will be a key success driver for more than 50% of organizations by 2025 if supply chain conditions do not rapidly improve. All signs point toward continued stagnation, so businesses should keep investing more in risk management.
4. Establish Relationships With Multiple Vendors
There will naturally be some overlap between different contingency plans for most businesses. One of those overlapping features should be a handful of back-up vendors. A diverse supply base is crucial for overcoming essential raw material shortages that have shown no sign of resolution.
Companies should look for alternative vendors who have their own diverse supply bases, multiple locations and clear lines of communication. These qualities demonstrate that the vendor is capable of managing supply chain disruptions.
Of course, finding alternative suppliers isn’t good enough. Businesses must also establish relationships with them and stay in touch. No vendor wants to be seen as a back-up plan. Discuss your various supply chain risks with them and take as much feedback as possible. Be transparent about the situation and don’t overpromise.
5. Stockpile Supplies Over Time
Stockpiling supplies has become a popular mitigation strategy in the last few years. Manufacturers and retailers are snatching up warehouse space everywhere they can to increase their quantities of raw materials and finished products. A thorough vulnerability assessment and contingency plan should make it clear which supplies a business needs.
Building up an inventory will initially be a big expense for many small businesses, but these companies have the advantage in the long run. The best time to stockpile supplies is when a business experiences rapid growth or launches a new product line. Since the business is buying lots of supplies anyway, it can simultaneously build a large stockpile.
It’s also a good idea to stock up on items when supply chain disruptions are most likely to occur, such as peak market activity periods or seasons with extreme weather. These potentially disruptive periods should be obvious if companies establish maximum visibility along the supply chain.
6. Bring in a Logistics Expert
Any organization that is struggling with improving visibility, conducting vulnerability assessments or formulating contingency plans should bring in a supply chain logistics expert. A third-party professional who can take the lead in disruption mitigation is a great resource for any struggling business. They can also help with navigating disruption-related expenses and surcharges.
Logistics companies can also help with reducing overhead costs, minimizing financial losses, improving customer service and supporting company expansion in the midst of disruptions. Sometimes an unbiased, independent professional is all a business needs to clarify and address its supply chain vulnerabilities.
More Supply Chain Disruptions on the Horizon
According to CNBC, more than half of logistics managers do not expect supply chain conditions to improve until 2024 at the earliest. More disruptions are likely on the horizon. Companies need to make all the preparations they can to increase visibility, manage emerging risks and keep their operations running.
They can’t lean on the hope that the economy will improve any time soon.
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