Supply chain resilience is a measure of how well a supply chain can withstand disruptions and still perform its primary functions. In other words, it's the ability of your supply chain to recover from interruptions in an efficient manner. The timing and severity of these disruptions can vary widely, including natural disasters or man-made events such as cyberattacks.
Resilient supply chains are more valuable than ever because they allow businesses to remain competitive by minimizing the negative effects of disruptions on production levels, revenues, and customer satisfaction. For example, how would you expect Walmart’s supply chain to be impacted by inflation? Would it be accounted for or reacted to?
With a successfully implemented supply chain risk strategy, businesses often earn improved financial performance due to reduced costs related to inventory losses, increased service levels and faster recovery times for damaged assets.
Globalized supply chain management
While economic and industrial globalization has dramatically reduced the cost of intermediate goods like electronic components, the associated uncertainty has created a more complex supply chain than ever before. In the modern world of international affairs, tariffs can be imposed at a moment's notice, currency values shift overnight, and political unrest can lead to disruptions in trade routes. All of these factors make global supply chains an urgent issue that requires constant monitoring and management by logistics and supply chain managment teams.
Globalized supply chains are diverse in many ways including geography, culture and language. To maintain efficiency and effectiveness within this environment it is important for companies to establish a conscious plan for derisking cross-border logistics where there may be varying costs or regulations associated with shipping goods overseas, via air cargo or sea freight services.
Monetary and fiscal impacts to supply chains
Economic conditions and international markets can also have an impact on supply chains. For example, supply chain, logistics, and freight businesses site inflation as a major concern and has negative impacts on their business.
Inflation is a connected risk, as it affects the cost of goods and services, which in turn impacts the cost of doing business, with the potential to increase your operating costs. Monetary policy decisions by governments can impact both domestic and international markets. For example, if your supplier sources a key raw material from China and prices spike due to tariffs or other trade policies, you may see your costs rise unexpectedly.
Similarly, changes in tax rates or other fiscal policy decisions could affect how much money you have available for investment in new technologies such as data analytics. A resilient supply chain definitively accounts for economic uncertainty– due to both political and consumer effects. Just like finance in supply chain, it’s important to think about all of the different ways that your supply chain process management may be affected.
How does a supply chain become resilient?
Resilient supply chains are built on an integrated, cross-functional approach that unites all aspects of the supply chain. That means working with multiple partners across functions such as production and distribution, in addition to taking into account external factors like weather and political events.
The first step toward building a resilient supply chain is creating a plan to synchronize all interconnected elements of the supply chain. It's also important to understand what makes up each link within that chain—the activities, resources, and information that work together to produce, deliver and sell goods or services—and how they relate to one another in order to efficiently manage risk across the board.
Rather than thinking about what supply chain disruptions may impact your operation, it’s important to actively account for probable issues. Diversifying suppliers and manufacturing partners helps reduce reliance on specific vendors during times of crisis. And implementing capacity buffers can give you more time if there's an unexpected spike in demand; while inventory buffers allow your business to continue operating even when suppliers aren't able because they're out of stock themselves!
The advantages of a resilient supply chain
When you have a resilient supply chain you can:
- Optimize operational efficiency and productivity. A resilient supply chain allows you to have transparency in supply chain, increase your speed on the market and reduce lead time by decreasing all the unnecessary steps in your logistics processes.
- Reduce the risk of failure. When there are multiple sources and/or alternate routes for shipments, no single channel is solely relied upon reducing the risk of bottlenecks and failures as would happen in unidirectional supply chains.
- Improve product quality, performance & customer satisfaction. Through integration with suppliers/partners & customers throughout value chains, better communication allows organizations to make more informed decisions about how to improve products & services before they reach customers. This leads to higher quality products & services which will ultimately improve customer satisfaction level.
Taking steps to manage risk and make your supply chain more resilient can help your business succeed in the long run
Rather than asking what is a supply chain, it’s much more important to understand what is a resilient supply chain. The bottom line is that supply chain resilience can be measured in many ways. It's important to have a good understanding of what your business measures as important, as well as how it wants to measure these factors. This will help determine the right metrics and goals for measuring resilience, which will then allow you to define your supply chain strategy and improve it over time.
With Amplio, building a supply chain as a key component of business success turns from a headache to a smile. As the first software platform built to predict and mitigate component shortages for hardware manufacturers, Amplio uses data science and machine learning algorithms to identify upcoming component shortages before they occur. By providing users with actionable recommendations on how they can increase their supply power, companies have supercharged their ability to source the BOM now and in the future.
This approach allows you to avoid costly delays, reduce inventory carrying costs, improve product quality by reducing defective parts, increase revenue by reducing sourcing costs, and reduce lead times through proactive planning with confidence in material availability.
What is supply chain management about?
The bottom line is that supply chain resilience is going to be an increasingly important part of your business's success– if it's not already. In today's increasingly interconnected world, you can't afford to leave anything to chance and the best way to protect yourself from problems with supply chain is by taking proactive steps like preparing for disruptions in advance and building a resilient supply chain network that can handle whatever comes its way.
