Geopolitical risks, climate change and fluctuations in demand: Global supply chains are massively affected by disruption and interference, even supply shortages. In the face of increasing risks and resulting consequences for the global economy, supply chain resilience is becoming ever more important. What steps should companies take in order to make their own supply chains sustainably resilient? We explain what the benefits of a resilient supply chain are and provide tips for their implementation.
The resilient supply chain: Key advantages
With a resiliently designed supply chain, companies are able to limit risks and remain capable of acting. This means that orders can be fulfilled despite production issues, material shortages or delivery delays. Resilience not only ensures that companies can survive in global competition, but it also improves their ability to act in crisis situations.
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Tips for a more resistant supply chain: How companies increase resilience
Complete protection against disruptions is hardly possible. That’s why it’s important to be able to respond effectively to crises. Many companies develop quick workarounds, such as increasing inventory levels. However, experts believe that a planned approach with long-term measures is crucial to success. However, which approaches are suitable for designing a resilient supply chain? Experience in recent years has shown that logistics managers should focus on the following aspects in particular:
- Determining your own supply chain resilience
To gain an overview, managers can use the public FM Global Resilience Index in order to analyze the resilience of the supply chain in relation to a specific location. The index compares the resilience of companies in 130 countries and regions worldwide. Thanks to the index data, companies can make predictions about the probable supply chain resilience in a specific region of the world: an advantage when planning future business strategies.
- Increasing the level of digitization
Right at the start of the pandemic, it became apparent that companies with a high degree of digitization had a greater degree of crisis resilience. Those that already had a digitized and integrated supply chain were able to respond more quickly to supply chain bottlenecks during widespread lockdowns, for example, or found alternative solutions to the loss of face-to-face customer interactions. These companies were also more able to respond agilely to fluctuating demand and thus secure their market position. A high degree of digitization along the entire supply chain is therefore essential. There is potential, for instance, in cloud use and process optimization through automation, as well as in the introduction of a well-founded supply chain risk management (SCRM).
- Keeping supply chain data in the cloud
Moving data, applications, and systems to the cloud provides greater flexibility and reduces vulnerability to disruption. Information can be shared in real time, allowing participants in a communications network to react and make decisions more quickly in crisis situations. In addition, the cloud resources required can be adapted at short notice, which means that peak times in e-commerce or increased remote access from the home office can be handled more effectively. Last but not least, the cloud as a cutting-edge technology forms the basis for business intelligence, i.e. the optimal use of other technologies such as AI and machine learning, which contribute to smart decision-making and optimization of increasingly complex SC processes.
- Automating supply chain processes
Whether it’s warehouse management, order processing or invoicing, tools and technologies in the field of supply chain automation enable companies to greatly reduce their manual workload and optimize productivity. A study conducted by market researcher ISG shows that companies can reduce their own resource consumption by 43 percent by using robotics to automate financial processes. Greater efficiency pays off: Further, thanks to automated processes, fluctuating order volumes can be managed and customer needs can thus be met. To make the most of the potential, logistics operators should analyze existing workflows and processes in order to then use automation solutions that are a well-tailored fit.
- Introducing a well-founded supply chain risk management
To minimize risks, supply chain managers should consider establishing a professional supply chain risk management (SCRM) system. This enables a permanent monitoring of identified risk areas as well as a fast processing and addressing of related information. Responsible parties and supply chain partners are thus informed at short notice about failures or delays. In this context, too, digital services and the automation of individual processes can provide significant support. Therefore, SCRM implementation should always be accompanied by an evaluation of new technologies and suitable IT solutions.
- Decentralizing the supply chain
It is generally advisable to diversify supply chains so that companies remain capable of acting even in times of crisis. A decentralized set-up ensures more independence, as alternative production and storage locations can be used at short notice. A decentralized approach is also recommended for the supplier structure so that the entire production is not disrupted in an emergency situation. Looking at Asia, for example, procurement markets such as India or Bangladesh are becoming increasingly important beyond China.
- Permanent learning and optimization process
According to the international consulting firm Goetzpartners, permanent learning is another basic requirement for resilience. Existing business processes and workflows must be rethought in the face of changing challenges, and necessary adjustments to SC must be made. This is best achieved in companies characterized by diversity, as the different competencies and perspectives of interdisciplinary and intercultural teams promote innovative problem solving.
Resilient supply chain as a success factor
On the road to a resilient supply chain, companies are not on their own. Experienced service providers such as Hermes International can help achieve greater resilience with know-how and smart tools such as a cloud-based SCM software. In particular, the relevance of a transparent supply chain should not be underestimated. After all, those who have transparent processes are able to identify weak points at an early stage. This ensures better predictability and more agility – important success factors for a resilient supply chain.