A key priority for every supply chain leader is resilience. In fact, resilience is cited in ASCM’s list of Top 10 Supply Chain Trends in 2023 “Resilient supply chain design will be critical to mitigating adverse events faster than the competition, providing excellent customer service, and generating value and market share.”
Supply chain managers who follow suit are going to be ahead of the curve now and in the future, when more unknown — and expected — risks are sure to follow. Resilience leads to the realization of operational and financial benefits, essential responsiveness, and make-or-break competitive advantage. Read on to find out more about what supply chain resilience is, the four pillars of building supply chain resilience, and the strategies and tools that can make supply chain resilience a reality.
What is supply chain resilience?
According to the ASCM Supply Chain Dictionary, supply chain resilience is the ability of a supply chain to anticipate, create plans to avoid or mitigate, and to recover from disruptions to supply chain functionality. In short, resilience is what keeps things running during a disruption — and what helps companies get back on track afterward. In fact, a study by Boston Consulting Group found that companies that focused on supply chain resilience doubled their competitive advantage in crisis quarters over their peers who did not.
In taking actions to be more resilient — such as streamlining operations and focusing on efficiency — companies also unlock ancillary benefits. These include boosting production output, increasing perfect order rate, cutting expenses and transportation costs, and increasing customer satisfaction.
The 4 A's of supply chain resilience
There are four principles of supply chain resilience:
1. Advocacy: Just like any business initiative, a plan for supply chain resilience needs executive buy-in, support and advocacy. From there, take a team approach and involve various departments in the resilience effort.
2. Awareness: The second step is knowing which risks could affect your networks and understanding the potential severity of each. This requires visibility into the supply chain to identify and respond to disruptions. It also includes having visibility into suppliers, suppliers' suppliers, logistics partners and inventory levels.
3. Agility: Agility is the ability to adapt to change. When it comes to supply chain resilience, this may involve sourcing materials from different suppliers, changing production schedules or using alternative transportation modes.
4. Action: There are many ways to become more resilient. In supply chain, some common initiatives include the following:
- Procurement: Companies need robust procurement strategies that include suppliers in different parts of the world that can fill in when other suppliers are experiencing disruptions and offer logistics benefits that skirt or overcome other disruptions.
- Operations are what drive your business, so they must be protected with resilience plans. Strategies can include having backup equipment, having multiple factories and warehouses, keeping buffer stock, and more. Another approach is striving for leaner operations that reduce complexity and waste.
- Demand is constantly changing. Companies should invest in sensing technology and advanced analytics to analyze market opportunities and prepare to meet demand or scale back to avoid waste.
Achieving supply chain resilience
Building on these four principles, supply chain organizations need to implement resilience-building strategies and tools:
Supply Chain Strategies
- Supply chain mapping helps track what partner does what, what products and operations are where, and who can be called upon during a disruption to another supply chain link.
- Increasing end-to-end supply chain visibility helps organizations to know what all parts of their supply chain are doing and how well they are performing. This can help to sense and mitigate disruptions.
- Leveraging big data for up-to-date insights gives supply chain managers up-to-the-minute information about whatever is being tracked, from inventory to customer demand to machine performance to shipment locations.
Supply Chain Tools
- Digital twins build on supply chain mapping to stress test the supply chain. This can help predict how your supply chain will react under pressure. It also can help you pinpoint weak spots.
- Supply chain control towers are centralized hubs that provide an integrated, complete view of the data across the end-to-end supply chain. They are commonly used for tracking inventory, but they can be used for other operations and for sharing data among supply chain partners to support transparency.
- Advanced analytics tools can parse out the big data collected by internet-of-things devices and analyze it to identify opportunities or needed interventions. The future will be about sensing risks and disruptions faster and sooner so that companies can have the most time possible to mitigate the disruption.
The foundation of supply chain resilience is knowing what is happening in your supply chain so that you can plan for, react to and recover from supply chain disruptions. Once risks are known, the next steps for building supply chain resilience will be unique to each industry and even each organization based on their specific operations and risks. Those steps should certainly involve establishing contingency plans for critical operations, building inventory buffers, and taking a team approach to addressing risk and resilience.
Push past the barriers with tech and training
Although supply chain resilience is important, it’s certainly not easy to achieve. For starters, the technology tools are expensive. Plus, much of the necessary foundational work, like finding the right data pools and data cleaning, is time consuming and sometimes downright tedious. Finding workers with the digital skills needed to effectively use this technology and support supply chain resilience is a top challenge for companies. In 2022, only 10% of surveyed companies said they had sufficient in-house talent to support their digital strategies. A third challenge is achieving supply chain visibility. In 2022, only 17% of surveyed companies said they had visibility into their third-tier suppliers or beyond.
The clear solutions to these problems are tech and training. There’s been a lot of buzz about transforming to a digital supply chain in recent years, and for good reason: Supply chains that were fully or partially digital when the pandemic hit were more likely to see the warning signs of a shock and pivot when necessary — and bounce back — as I wrote in January. Developing digitized data, integrating communications, and automating processes to improve performance are some of the crucial steps. And each requires a knowledgeable and proactive workforce.
Looking to the future of resilience
To build resilience, address vulnerabilities. As software company SAP explains, “The most resilient and agile supply chains are designed to do more than simply resist and recover; they are built using processes and modern supply chain technologies that allow them to forecast, anticipate, and respond quickly to whatever risks or opportunities the future brings.”
It’s a hopeful message: not just one about disruptions and challenges and shocks, but new prospects and chances for renewal. And it’s the right mantra for the rest of 2023 and beyond.
Your organization can achieve supply chain resilience. Start with the pillars, strategies and tools highlighted above and build a supply chain resilience plan to mitigate risks and disruptions. Start by advancing your supply chain resilience knowledge and skills with the ASCM Supply Chain Resilience Certificate, launching this December.