A recent survey found that 87% of supply chain professionals plan to invest in resilience in the near future, which is no surprise given the amount of global events which have shocked supply chains recently. Political turmoil, a pandemic, and an increase in natural disasters have disrupted business operations to the point that many executives are shifting away from a “just in time” supply chain strategy to a “just in case” approach instead.
In order to increase the strength of your supply chain while also maintaining a streamlined operation you’ll need a fresh perspective, detailed operations map, data-based models, emergency plans, and perhaps some new partners – just to name a few. Learn more about how to build a supply chain better suited to today’s uncertain environment.
Identify Supply Chain Problem Points
The first step in building resilience into your supply chain is to take a fresh look at your system and identify problem areas. Something as simple as a communications breakdown between manufacturers and assemblers could be slowing down operations; a quick update of your inventory data could highlight weak points in your process.
In our decades of experience, we’ve noticed that some of the most common supply chain issues are value and risk – problems that have always plagued supply chain managers and are even more pronounced in today’s volatile business environment. Bringing in a third party to assess your supply chain against today’s competitive business environment can result in new approaches to resolve these issues for a more secure, streamlined operation.
Seek Onshore and Nearshore Suppliers
Today’s global economy makes it easy to connect with partners across the world – but that doesn’t necessarily mean that going global is the right approach for every problem. A recent study found that more than half of business executives listed insufficiently localized supply chains as a moderate to major risk to their operations.
While offshore vendors may provide opportunities to cut costs or boost efficiencies, their increased distance may also equal increased risk. Given the recent rise in global uncertainty, many organizations are balancing risk by broadening sources and pivoting to onshore and nearshore suppliers. By doing so, they’re reducing risk by simply cutting down on time, distance, and border crossings.
Make Change Outside the Chain
Although supply chain experts may be balancing their focus to include nearby vendors, they’re simultaneously expanding their perspective on what the typical supply chain entails. In addition to overseeing basic supply chain components like warehousing and distribution, logistics professionals today are increasingly involved in sales, operations, marketing, and even product development. All of these departments can impact a supply chain and modern technology allows managers to quickly “connect the dots” between parts of an organization to better identify risk points. With a more holistic view of operations, managers can make informed decisions, prevent bottlenecks, and build resilience into their supply chain from the start.
For example, we have experience working with a fast-moving consumer goods manufacturer supplying a major retailer that had begun levying significant fines on suppliers for not delivering orders on time and in full (OTIF). This manufacturer was experiencing high levels of fines from the retailer and reduced sales (20% of orders that were unable to be filled were going to competitors) due to having insufficient inventory to meet the retailer’s demands.
We approached this problem in two phases. First, we implemented a simple, low-cost change: move the manufacturer’s delivery date up by one day. This quick fix immediately reduced fines. The second part of our solution was conducting a detailed analysis to identify problem SKUs – products that were often out of stock due to unpredictability of the retailer’s ordering habits as well as the unpredictability of raw material supply. We incrementally boosted inventory levels for these SKUs and measured performance.
Over the next few months, we found that delivery performance and sales significantly increased for this retailer and fines dropped markedly. Furthermore, our cost/benefit analysis showed that the added cost of the inventory was well worth it to avoid the fines and loss of sales that would have otherwise occurred.
Plan Ahead with Predictive Modeling
Pivoting to a “just in case” supply chain comes with costs; fortunately, predictive modeling tools can help companies optimize their investment. “Digital twinning” allows executives to simulate different supply chain scenarios without actually implementing them on the ground, therefore identifying weak spots before they arise. This strategic approach, used by leading supply chain companies such as Toyota, helps companies keep their supply chains lean yet secure.
Global uncertainty has reached new highs in the past few years due to events such as COVID, Brexit, U.S.-China trade tensions, and the war in Ukraine. Additionally, a surge in natural disasters and other weather events means that executives operating supply chains on a global scale should be prepared for disruption.
Preparing for unplanned events is obviously no easy task; that’s why it’s important to map out your entire supply chain and have an emergency plan to keep things moving along during a shock. An emergency plan could include everything from simply increasing stockpiles of inexpensive, easy-to-store materials during periods of stress to the creation of standby capability agreements or inventory allocation agreements allowing companies to co-produce or obtain similar products during times of industry-wide uncertainty. Taking the next step to make your supply chain remain lean yet stay secure can be challenging for executives simply trying to keep up with volume and intensity of change in today’s market.
Consider Outside Perspective
An outside perspective from a third party can often help you see what you can’t see. At times, an expert with a fresh point of view may be able to assess your current challenges and priorities, analyze relevant company information, apply benchmark data, and clarify the critical few actions to take precedence now to move the needle. To learn more about creating an operation that’s built to endure the unexpected, and to move on critical supply chain priorities quickly, get in touch with Ankura’s Transformation group.
© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.