How to Create a Resilient Supply Chain

Supply chain resiliency has quickly become a major topic across the world. Right now, companies are continuing to grapple with the impact that major disruptions  — like those caused by COVID-19 — have had on modern supply chains, which tend to be global and vulnerable to sudden shocks. Building a resilient supply chain is possible, and it can have some big benefits for businesses that put effort into strengthening their supply chain practices.

Below are some reasons why business leaders around the globe are talking about supply chain resiliency. Additionally, learn how businesses may be able to design supply chains that can stand up to sudden disruptions.

Why a Resilient Supply Chain Is So Important

For decades, business supply chains have steadily become leaner and more global. The trend has provided some serious benefits for companies — including improved efficiency, greater inventory levels and faster delivery.

However, reducing buffers and prioritizing efficiency at the cost of slack has also made supply chains extremely vulnerable to disruption. Major interruptions — especially natural disasters like hurricanes, earthquakes and tsunamis — may only affect one region. But because modern supply chains are so complex and interconnected, their impacts tend to both ripple outward and stick around.

For example, months after Hurricane Sandy struck the Northeastern Coast, the fuel supply chain remained extremely vulnerable due to flooding that shut down fuel refineries and supply stations.

Worse, the more global the supply chain, the more likely some link in the chain will be influenced by these high-impact disasters. Widespread disruptions hit these globalized supply chains even harder. Most recently, interruptions in the wake of COVID-19 were so serious that there were fears that the supply chain might collapse altogether.

These are some of the most extreme examples, but it doesn’t take a major disaster to knock out key links in the supply chain. A ransomware attack — in which a virus uses encryption to lock down essential network files and systems — launched by a savvy hacker can easily knock a distributor offline, at least temporarily.

A resilient supply chain is one that is prepared for these disruptions. Businesses can keep raw materials and finished products moving, even during a regional or industry-wide disruption. Supply chain resiliency is probably the best way to guarantee the continued availability of goods and maximum control over supply.

Identifying Risks and Weaknesses

While many current supply chains can’t withstand shocks, businesses can still rebuild them for resiliency.

For most businesses, building a resilient supply chain will start with research. An audit or deep dive into the suppliers, vendors and distribution companies a company works with can reveal potential risks. Companies can also determine the level of impact disasters will have on each of their vendors. If all of your vendors are highly likely to go offline due to flooding, for example, it’s best to either create a better mix of vendors or have extra inventory on hand to reduce the effect on your business.

This research will need to be in depth. It must also keep in mind that the supply chain isn’t a series of one-to-one relationships between businesses. One organization may depend on multiple suppliers for raw materials. These suppliers may, in turn, have their own network of vendors and suppliers they rely on to keep running.

An effective review of supply chain risks should consider all the possible vulnerabilities faced by this network of relationships. For example, certain suppliers may be more vulnerable than others to cyclones.

Building a Resilient Supply Chain

This research can also be an opportunity to overhaul current supply chain practices and tackle common logistics management problems — like limited forecasting models or insufficient inventory management tech. It may also allow businesses to shore up other weak spots. One company, for example, might find that their supply chain workers aren’t particularly engaged, and that lack of interest could be negatively impacting productivity. Once identified, they can patch these weak spots up.

From this research, businesses can identify which suppliers they can’t operate without. Then, they can identify potential backups or alternatives. At this point, it may be a good idea to begin cultivating relationships with other suppliers that can provide goods when primary vendors can’t.

For businesses in the middle of the supply chain, supply chain resiliency may also mean identifying alternative audiences and secondary markets for the goods you sell. The agriculture industry was one of the sectors hit hardest by COVID. When restaurants shuttered, many farmers lost out on their main customer base — meaning a lot of produce had nowhere to go. As a result, grocery store shelves were left empty as produce like eggs, milk and fresh vegetables were destroyed.

Months after the initial shock, farmers and food producers had begun to identify alternative markets. In some cases, this meant working with community-supported agriculture programs or farmers markets. In other situations, businesses starting selling directly to consumers using improvised markets.

How Businesses Can Improve Supply Chain Resilience

COVID-19, which disrupted global supply chains, has business leaders talking about how they can improve supply chain resilience. Right now, many existing supply chains are very vulnerable to disruption. They will stay global in the future, which means they’ll continue being susceptible to worldwide interruptions.

Businesses can make these supply chains more resilient with the right research. This information will allow organizations to identify alternative suppliers and markets they can tap into during a crisis. Building relationships with these suppliers and preparing to sell in these markets could strengthen existing supply chains against sudden shocks.