Supply Chain Resilience

The global COVID-19 crisis has brought supply chains front and centre. People who may not have even previously heard the term – although were probably unconsciously familiar with the concept – now have a greater understanding of how critical these networks are to modern society.

Even now when the worst days of the pandemic are fading into memory, other emerging global crises are compounding its fallout such as the Russian invasion of Ukraine. With no end to that conflict in sight, we need solutions to our supply chain woes today.

We need to increase the resilience of our supply chains, so the impact of any future crises is reduced as much as is possible.

Transparency

According to research by McKinsey, the number one factor companies need to focus on to make supply chains more resilient in the future is transparency. Greater transparency leads to an improved ability to respond to situations as they emerge.

80% of people surveyed in McKinsey’s research said the key to unlocking increased transparency in supply chains was to improve and invest in digital planning.

“The holy grail of supply-chain risk management is multitier transparency,” said McKinsey’s Knut Alicke. “A lot of companies have visibility into their direct suppliers because they have a contract with them. Often the problem is not with the first tier but with the first, fourth, and fifth tiers. And what everyone is now looking into is how to create this visibility when something is going wrong and have an early-warning system so they can do something about it. From a tech perspective, this is possible to solve today. You also need to create trust amongst the partners, and the ecosystem of the supply chain.”

Inventory and Planning

Before the pandemic, it was common for supply chain planning meetings to occur just monthly or even quarterly, but this will no longer do in the new normal in which we find ourselves.

Biweekly or even weekly planning cycles should now become standard operating procedure. This means inventory footprint can constantly be assessed and reassessed to ensure business critical items do not run out during crucial moments – or indeed global crises. Employing multisourcing and dual sourcing will make an organisation less reliant on critical suppliers and allow inventory levels to be kept in a state where just in time supply chain practices are less important than they once were

“Things can then die in inventory, and that’s not really helping your cash flow,” continued Alicke. “So, you need to increase the inventory for the critical stuff, and you need to make sure that you are less dependent on critical suppliers. Therefore, multisourcing and dual sourcing is very important. To do that, you need to invest in digital talent to be able to do the planning, understand all of the algorithms, and with this, come to a fast decision.”

Final Thoughts

Supply chain resilience is going to be critical moving forwards. By increasing transparency and investing in digital planning, businesses can better manage inventory and become more agile when it comes to responding to emerging crises in the future.