Supply chain resilience is perhaps one of the most important hallmarks of a truly strong logistics process. Generally speaking, it deals with how any particular business can foresee discontinuity that may strike without warning and also develop the ability to prepare for, respond towards, and recover from such eventualities. It means that a company will be able to minimize problems and reduce their adverse impact on its operations, apart from increasing the supply chains' overall efficiency.
Anything can cause a supply chain disruption in today's unstable global market: pandemics, geopolitical conflicts, and even cyber-attacks. Think about what hurricanes do to world trade. For example, at Desteia, we estimated that well over a quarter of global trade has, over the last five years, been disrupted due to hurricanes-a figure likely only to increase in the next couple of years with the prevalence of climate change. By knowing which ports have been traditionally more prone to weather-related disruptions, it allows companies to contingency plan for that and prepare for any resulting impacts.
This in summary means that a company whose supply chain is resilient will not only be ready to respond to any risk that comes but also be capable of ensuring continuity and recovery at speedier pace-more so, at the very least, as compared to its competitors who have devoted less time to their preparation for such a disaster.
It is precisely these resilient supply chain management practices that separate successful businesses from the rest. Given its importance, we wanted to look more closely at what is supply chain resilience; why it matters, and what companies can do to become leaders in this field.
Flexible Supply Chain
When we talk about a flexible supply chain, one normally refers to the ease with which external shocks can be withstood by a company. That is to say, how much their original supply chain can bend before breaking. This is crucial in today's quick world, full of surprises. The flexibility will then enable an enterprise to change direction as fast as possible to respond to instantaneous alterations that might be experienced due to changes either in consumers' demand or even global disruptions such as those natural catastrophes we mentioned earlier.
Other ingredients of supply chain resilience include a flexible supply chain. This agency ensures that businesses are not crippled in case an unanticipated challenge arises but allows ease of changing circumstances.
Think for instance of an automobile producer during a shortage of semiconductors—like that which started in 2020. You might not think of it, but modern cars are in need of dozens of sensors to operate; from proximity sensors detecting neighboring traffic to those used to measure air levels in your tires. If the world ran out of chips, car makers couldn't find all the chips needed to make a fleet of cats. However, with flexible and resilient supply chains, companies that lined up alternate suppliers and shifted orders did not show any significant production delay. Their flexible supply chain helped them to run factories and meet customer demand without disruptions.
At Desteia, we believe logistics operators must have all the necessary tools to build the best supply chain resilience strategies. For this reason, we offer real-time insights through continuous monitoring of possible disruptions thanks to an AI-powered system. Users will then be able to modify their operations if need be.
How Does Supply Chain Resilience Work?
Then, achieving supply chain resiliency is not merely a question of reacting to problems as they arise but proactive planning vis-à-vis probable disruptions, investing in technology, and maintaining good relations with suppliers and logistic partners. In other words, a resilient supply chain would be one that can anticipate risks, adapt to disruptions, and recover promptly to ensure that business operations suffer minimal effects.
While every company is going to have a different process, there are five areas that often intersect in the building of a resilient supply chain:
Securing Data: The first and foremost step in constructing a robust supply chain is ensuring that your company has adequate data on which to base its decisions. This goes both for historical data, which allows you to compare vendors and shipping lanes, as well as real-time information about disruptions that empowers you to take appropriate action.
Optimizing supply chain plans: Once a company achieves a good level of visibility, it can consider its present supply chain plan and search for ways to optimize it. Continuously refine and adjust the supply chain strategy as new data arises. In this way, enterprises can progress toward fulfilling demand with fewer inefficiencies. For example, Desteia's AI platform can examine historical information and anticipate demand variabilities that enable the optimization of inventory levels, which otherwise would be prone to stock outs or excesses.
Diversify suppliers: The significant rise in the number of suppliers, with the diversification being enough that when one incident arises, it would not hit them simultaneously, is an important strategy toward the enhancement of resilience. Suppose the base of suppliers is diversified across different regions; this will make certain that the company will depend on no single area and hence will be in a position to continue when one supplier is affected by problems such as regional conflict or factory shutdowns.
Automate and use technology: Technology also helps to strengthen the resiliency of supply chains. Automation smooths out the processes, while real-time tracking empowers businesses to take instant action over disruption. In this regard, the AI-powered platform offered by Desteia will help companies in enhancing their visibility with minimum time consumption for implementation.
Foster key partner relationships: A resilient supply chain is a collaborative one. By investing in relationships with suppliers, logistics providers, and customers, the lines of communication become more clear, and problems are sorted out far quicker. Then, when errors occur, you can work with providers and carriers to figure out the most practical solution.
These may sound like simple categories, but can take several weeks or months to implement. Building trust and gaining analytics are not simple tasks that supply chain operators have to do day to day. However, by investing in these categories, companies can create a more resilient supply chain that could bear up under unexpected disruptions.
Top Benefits of a Resilient Supply Chain
Various advantages offered by supply chain resilience even bring long-term success to companies. Though there may be many advantages in general, we would like to emphasize four major benefits of supply chain resilience:
Improving Productivity: A resilient supply chain minimizes shutdown time that may be caused by specific interruptions of operations. For example, a company that has several suppliers can easily switch over to another at times when one of its suppliers is experiencing production delays, thereby avoiding the cessation of operations in the company's main factory.
Risk mitigation: Resilient supply chains are those that can foresee risks like natural calamities, shortage of supply, or political destabilization and can install plans which may reduce impacts before these take a serious turn and cause serious harm. In general terms, companies that invest in supply chain resilience strategies are those best prepared to manage and mitigate risks and as such are able to ensure business continuity even under adverse conditions.
Cost reduction: Supply chain disruption is going to increase costs through delays, lost productivity, and emergency solutions. According to a rough estimate by McKinsey, companies may lose as high as 3.5% of revenues due to disruptions. Taking this approach proactively and preparing against potential disruptions will help the company create a resilient supply chain that minimizes not just cost but ensures continuity of operations with minimum interruption.
Improving operations: Resilient supply chains will be able to work more effectively due to streamlined processes and automated solutions in place. A company with real-time data and predictive analytics reports better decisions faster and cuts down lead times for improved performance.
Consider the example of a major retailer reaping fewer stockouts and lower costs during the COVID-19 pandemic because of its prior investments in a resilient supply chain management system. If it had any in place, inventory would have been optimized, spikes in demand would be coped with, and expensive disruptions would be minimized. In the meantime, companies without such a system likely fared at the mercy of a number of interruptions during the same period.
AI in Supply Chain
With supply chains continuing to evolve, and the creative development of companies' procurement structures, technology will clearly be more important for building resilience in supply chains. Artificial Intelligence has already become one of the major drivers for supply chains to get smarter, agile, and far superior in handling disruptions. Certain AI-powered technologies, such as predictive analytics, help a company foresee likely issues, route optimization, and smoothen the flow of goods even in areas where predictability can be a problem.
At Desteia, we believe AI could help firms shore up supply chain resilience with ease. That's why we created an AI-powered system that takes supply chain management to the next level by providing real-time insights, predictive analytics, and document management at our user's fingertips. Unlike other solutions in the industry, we combine real-time data with an AI capable of identifying trips based on information found on your own communication channels. This enables logistics operators to react to crises without having to track their shipments manually on a day-to-day basis.
With AI continuously revolutionizing the logistics field, businesses that will implement such technologies are becoming more competent and ready for survival in a global market that keeps on getting complicated. Want to learn more? Request a demo and check our latest developments on our blog.