Is Your Supply Chain Risk Resilient?

The global Covid-19 pandemic was an unprecedent event that rocked the world and many industries with it. Given the nature of how they work, supply chains also suffered heavily due to the pandemic, mostly due to not having sufficient risk aversion when it came to the individual parts of the supply chain.

Supply chains are a large, interconnected network of industries that many organizations rely on for proper functioning. In order for the organizations to function, every part of the supply chain needs to be functioning smoothly.

A survey from 2020 suggests that most industries suffered losses ranging from USD 50 to 500 million globally due to the pandemic. Most companies in this survey indicated that they suffered some negative effect, with the majority indicating major losses.

No one really anticipated a global event like the pandemic taking place. It did however reveal many vulnerabilities in supply chains that companies didn’t know they had.

In the post-pandemic world, more and more businesses are trying to reinforce their supply chains to make them risk resilient in the case of a similar crisis in the future. With that in mind, how risk resilient is your supply chain?

How to ensure that you supply chain is risk resilient?

Supply chain management involves managing the many parts of the supply chain to ensure that they are all functioning as efficiently as possible. Good supply chain management should be able to increase the efficiency of manufacturing and distribution of a product, while still maintaining the profit margin.

Good supply chain management will also require ensuring that your supply chain is risk resilient. In order to do so, you have to first find the vulnerabilities in your supply chain.

Finding vulnerabilities in the supply chain

Finding vulnerabilities in your supply chain will certainly not be an easy task. There are a few different things to consider when doing so:

???Understand and map out your supply chain structure – Finding vulnerabilities will require you to have a clear understanding of your supply chain’s structure. This gives a clear idea of how the supply chain operates, how the goods and services flow across the chain, and will help you identify the various entities involved in the process. Mapping the entire supply chain will allow you to find vulnerable spots, such as suppliers that are more vulnerable to risks, and will help you plan contingencies better. Comprehensive mapping of your supply chain structure is a crucial step in identifying vulnerabilities and ensuring supply chain resilience.

???Assess the risks for each entity – Mapping out your supply chain will give you an idea of where the vulnerable spots lie. For example, consider a supplier that will not be able to supply in the event of a major crisis that affects transportation. This will cause your entire supply chain to fall into disarray. Similarly, look at other potential vulnerabilities in the supply chain, such as security measures and poor data management.

???Diversify your supply base – Knowing vulnerable suppliers can help you prevent the risk of the entire supply chain shutting down in the case of future crisis. Diversifying your supply base will help protect your supply chain from stopping completely. For example, China is a major supplier of many raw materials across the world. A company in India that heavily relies on Chinese raw materials can diversify and look for local sources to prevent the supply chain from drying out in the case of borders shutting down.

???Ensure inventory buffers – Alternate suppliers might not be something that is readily available. In that case, the company should ensure that there is sufficient inventory buffer to maintain a supply chain production in case the supply itself stops. While this carries its own risks, such as additional storage costs, it can help save you money in the long run.

???Understand and leverage the power of data – As the world moves more towards AI and advanced data analytics, it is high time to consider investing into Big Data, if you’re not already. Companies that can make use of Big Data and AI analytics have shown significant improvement in supply chain resiliency. AI and machine learning based analytics can help not only analyse existing datasets, but can also learn and predict risks in the supply chain.

???Review existing contracts and find new collaborators – Diversifying your suppliers isn’t the only way to assess vulnerabilities in the supply chain. If there are other parts of the supply chain that need to be reworked, then it is time to consider reviewing your existing contracts and find vulnerabilities there.

Concluding thoughts

In the grand scheme of things, supply chains are like complex machines with lots of moving parts. Finding risks in such large operations can be tricky, but is possible if you have everything mapped out. Once you can pinpoint vulnerable nodes in this map, it will make making contingency plans and reworking existing contracts much easier.?