Supply Chain Resilience: Practical Approaches to Creating Business Value

The global pandemic, coupled with an increase in geopolitical tensions and climate-related events, brought supply chain disruptions into the mainstream. While images of port blockages and lots filled with undeliverable new vehicles are no longer dominating the evening news, these issues have not been resolved and could resurface any day. In fact, semiconductor industry growth, continued geopolitical and climate uncertainty, increased interest rates, and efforts to re-shore/near-shore elements of the supply chain are making supply chain resilience as big of a challenge as ever. But there is hope. Find out how leading supply chain stakeholders are reducing risk exposure and improving resiliency while also protecting top line revenue and optimizing working capital.

Even as they acknowledge the need for increased resilience in their supply chain, many companies struggle with how to address the challenge. We see several contributing factors here, from ownership within the organization, to viewing a program as a nice to have discretionary item, to being overwhelmed with the threat landscape.

Modern supply chains are complex and global, adding to the resilience challenge. Leading firms have clear sourcing strategies and prioritize their segments on revenue risk. Supplier selection and performance management efforts are focused on the suppliers with the highest potential impact. Partnerships and collaboration are effective methods to reduce potential disruption.

While risks and risk management are not new terms, we are talking more and more about resilience. Risks are things, events, potential disruptions. Their likelihood and impacts can be reduced but not eliminated. Resilience is an active pursuit, a momentary state, to continuously improve an organization’s risk posture compared to their risk tolerance. The most advanced supply chains embed this continuous improvement into their planning, execution, and supplier relationship management. Events are integrated into advanced planning systems. Risk teams work with planning and procurement to identify potential scenarios. Weak areas are identified, evaluated, and addressed.

Most procurement organizations are aware of their direct suppliers, yet few companies have a deep understanding upstream to their suppliers’ suppliers. Even that awareness of direct suppliers is often captured as the headquarters or accounting location. A key aspect of a resilient enterprise is the ability to see into the sub-tier at the manufacturing/assembly location. This visibility is becoming mandatory to comply with ESG and labor regulations. It also strengthens a supply chain’s visibility to single points of failure farther upstream.

There can be a tendency to view a resiliency program or focus as a discretionary insurance expense: spend more for components, hold more inventory, deploy more people to manage suppliers. The most resilient organizations are finding the opposite, that resiliency drives revenue growth, protects revenue, and ultimately saves money. The business case for better safety stock coverage, fewer expedite fees and emergency qualifications, in addition to fewer stockouts and late deliveries delights customers and shareholders alike.