Supply Chain Resilience and Supply Chain Strengthening

Strengthening supply chains: How to navigate today’s high-stakes global trade landscape

Efforts to strengthen supply chains are as old as supply chains themselves, but today’s global networks require a more proactive, ongoing and detail-oriented approach. Even if you already have a resilience plan in place, now is the time to reassess your preparedness.

Also read: Stay resilient wherever you are: Uncertainty in global supply chains to persist

Few efforts are more important to the pursuit of global trade than building stronger supply chains. Yet despite this, too many organizations fall victim to risks they could have mitigated.

In fact, most of the challenges facing supply leaders are not new. Geopolitical tensions, wars, piracy, natural disasters, pandemics, and weather events are all old risks. What is new is the frequency with which these risks occur.

Most supply chain professionals couldn’t imagine a global pandemic leading to increased ocean freight costs 1,000%persistent and far-reaching cybercrime threats, or simultaneous global conflicts. This is the current high-risk environment for global trade. That’s why it’s never been more important for leaders to reassess how to strengthen their supply chains and revisit supply chain resilience plans.

At its most fundamental level, supply chain resilience comes down to having an actionable risk management plan – a roadmap for how you will respond to events that impact your business. However, having a plan isn’t enough, you also have to be able to execute it quickly to have a resilient supply chain.

So what should supply chain leaders do to ensure they are prepared? It starts with having the right mindset.

Risk management thinking is critical.

The most resilient supply chains—those that can operate effectively even in the face of catastrophic events—are the result of a risk management mindset that emphasizes diversity. These supply chains are an effort by organizations to lay the foundation for plans that can be implemented and acted upon quickly. At their core, they address two imperatives:

• The need for alternative suppliers: Having alternative sourcing options is a hallmark of any supply chain resilience plan. It can also be one of the hardest things to achieve, especially for organizations that rely on raw materials that are highly specialized or come from areas of the world prone to conflict or disruption.

Identifying alternative suppliers is not easy, and vetting them takes time. This is especially true in highly regulated industries such as medical devices, which can take 10-18 months to vet sources and meet compliance and quality requirements. The time to develop these backup plans is not when an incident occurs, but long in advance to ensure continuous operations in the event of an incident.

• The need for cross-functional collaboration: Organizations with effective supply chain resiliency programs know that their decisions require input, buy-in, and support from colleagues across a wide range of internal business functions, including product design, procurement, finance, and marketing. For example, if a rare resin used in extrusion molding is only available from a single source, it’s worth exploring whether a more common item can be substituted. These issues should be explored with design and quality teams.

Cross-functional collaboration is also particularly important if new suppliers need to be brought on board, such as when the risk of any parts shortage is critical to the company’s operations and performance. Bringing on new suppliers requires collaboration not only from procurement to review the supplier’s financial strength, quality, and business practices, but also from finance.

Other departments may also need to be included to answer questions such as whether the risks involved justify the capital expenditures required to store the additional supplies and fulfill them, and whether the carrier partners can effectively add them to the company’s supply chain network.

Once onboarded, the second most important step in developing any supply chain resiliency plan begins. Vigilance must be maintained.

Resilience requires constant monitoring.

Importantly, supply chain visibility and supply chain monitoring are two different things. Supply chain visibility boils down to understanding where supplies come from—including where suppliers get their materials from—how and how often they are delivered, and when disruptions occur. But supply chain visibility alone is not enough to provide full assurance.

In-depth monitoring is essential, not only to monitor the supply chain, but also to monitor the various issues and events that may affect the supply chain. Monitoring efforts should be multifaceted and address several key factors:

• Track the right performance indicators (KPIs): Leaders should ask themselves whether they are measuring the right metrics to determine whether the supply chain is operating optimally and protected from risk—which will vary from product to product. Internal metrics such as overall equipment effectiveness (OEE), throughput levels, maintenance costs, and performance benchmarks (including whether continuous improvement is being achieved) must be tracked.

• Monitor suppliers using a supplier scorecard and conduct routine reviews: As a matter of course, metrics such as on-time and in-full (OTIF) delivery percentages and quality levels should be analyzed. Leaders should also conduct annual or quarterly business reviews with suppliers to maintain a dialogue and gain insight into supplier financials and other factors. These reviews should also be used to strengthen relationships with suppliers. When difficult circumstances require supplier diversity, suppliers will naturally look after customers they know first.

• Monitor global events: No one predicted the devastating impact the hard drive industry would have on the Taiwan floods of 2011, or the collapse of the Francis Scott Key Bridge this year, or Uyghur Forced Labor Prevention LawIn all cases, supply chain leaders who can act quickly gain an immediate and significant advantage. Acting quickly requires constant monitoring of world events and the risks they present.

Perhaps most importantly, supply leaders must remember that business continuity and a resilient supply chain require not only hard work, but continuous work. What it means to be prepared changes daily, just as the events that test it do. Now is the time to reassess the supply chain resiliency program that has served you well, and take action to ensure your organization is ready when a disruption occurs.

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Matt SteikerPlante Moran Supply Chain Executive serves clients by quickly identifying improvement opportunities that deliver tangible results and reduce costs in a variety of industries, including medical devices, food and beverage, footwear and apparel, military vehicles, and automotive manufacturing. Matt received his bachelor’s degree in Supply Chain Management from Central Michigan University and his MBA from Wayne State University. He has been with Plante Moran for 10 years and previously held supply chain roles at Mercedes-Benz Technologies and Ford Motor Company.

Aaron ErnestAaron is a Senior Consulting Manager for Supply Chain at Plante Moran, helping clients identify, prepare for, and respond to market disruptions and events that impact their supply chains and business models. Prior to joining Plante Moran, Aaron was a project team leader at a global Tier 1 automotive supplier, overseeing a full range of efforts from engineering and design to manufacturing and supply chain operations to reduce costs and improve product quality. He has been with Plante Moran for nearly a decade and received a bachelor’s degree in supply chain management from Michigan State University.