COVID-19, war in Ukraine, inflation: In 2022, supply chains around the world were under huge pressure. Operational risks and disruptions threatened several areas of a supply chain and had a very direct, far-reaching and global impact: on logistics, suppliers and the workforce. Additional pressure on supply chains stems from everyday challenges -– unexpected competition, sudden changes in market trends or rapid shifts in consumer buying behaviour. So it is more important than ever that supply chains are designed to withstand the challenges of today – and tomorrow.
However, apart from that, supply chains should and must be able to predict risks and opportunities of the future, anticipate them and react almost in real time. The keyword of the day is resilience. Or, to quote PricewaterhouseCoopers: “It’s not just about playing defence — it’s also about playing offence — finding competitive advantage by shaping a strategy for supply chain resilience focused on disruption avoidance.” In this article, you will learn how to increase the resilience of supply chains, what threats endanger supply chains today, and what tools companies can use to identify and eliminate risks.
A resilient supply chain is one that is able to adapt to changes and challenges and still maintain or even improve business operations. This capacity for adaptation and resistance is often referred to as "resilience".
A resilient supply chain is most notably characterised by:
There are many factors that can lead to disruptions in the supply chain, including natural disasters, political unrest, labour strikes, transport problems and pandemics. Some of the most common and dangerous supply chain disruptions are:
Resilient supply chains are characterised by the sum of several measures, which in combination significantly increase resilience. One of the most important measures is diversification. A supply chain consisting of several suppliers and manufacturers facilitates compensation of failures. Another indispensable module is flexibility. Companies should be prepared to react quickly to changes in supply and demand. With optimised, agile and scalable production and supply processes, it is possible to response efficiently to all changes along the supply chain, even in challenging times. If market conditions change or unexpected, unpredictable events occur, it is important to reduce disruptions in business operations and to maintain day-to-day operations. Redundant capacities and resources are recommended here – the prepared "Plan B" for the worst-case scenario. A digitised supply chain affords companies good visibility and traceability of materials, products and services – and all the necessary information and data to quickly identify and subsequently resolve problems. Last but not least, a resilient supply chain is characterised by close relationships with suppliers and customers. With mutual support, challenges can easily be better managed. Overall, building a more resilient supply chain requires systematic planning and implementation of measures to mitigate risk and improve resilience.
The basis for an optimal supply chain management with higher resilience is a comprehensive and continuous risk assessment of the entire supply chain. This is the only way to identify potential vulnerabilities and define catalogues of measures that allow timely intervention in the event of interruptions or failures. Transparency, flexibility, agility and diversification: many small and exceedingly small parameters flow into supply chain management. To ensure that the overview is not lost, central, digital platforms – on-premise or remote in the cloud – are an excellent approach. The centralisation of the data with subsequent visualisation turns the individual data islands, which are necessarily incurred in the management of supply chains, into usable bases for business decisions.
To identify the risk incurred in the depth of the supply chain, there are some steps that companies can take:
The most important and efficient methods for identifying risks in supply chains include SWOT analysis on the one hand and the risk matrix on the other. While the SWOT analysis identifies potential risks in the supply chain and can predict failures by assessing internal and external factors, the risk matrix serves as a tool to assess the extent and likelihood of supplier risks. The better the risk potential is recognised, the more precisely can response catalogues be specified and dangerous breakdowns in procurement be prevented.
Please also watch our expert video with Helena Jochberger from CGI on Resilience here:
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