What is a resilient supply chain, and why does it matter?
Imagine a web of suppliers, businesses, and logistics that gets products from the source to the consumer. Supply chain leaders need this web to be tough so that they can bounce back from any shocks like natural disasters or geopolitical tensions. This toughness is what we call resilience.
In the last few years, organizations’ focus on resilience in supply chain systems has ramped up. Why?
Because the times we live in have proven more than once that they are uncertain, and different problems – be they the results of the conflict between Russia and Ukraine or trade wars involving the US and China – reveal the fragility of contemporary supply chains.
But that’s not all. The Executive Survey 2024 from Make UK and PWC mentions other factors that affect supply chains such as inflation, high energy costs, and access to skills or labor.
This shows us that the cost of retaining multiple supply locations or building up safety stocks is essential for keeping a business turning. Risk management practices and the agility to respond to pressing supply chain challenges are key to maintaining supply chain performance. They contribute to greater resilience against disruptions, boost reliability, improve visibility, and drive a competitive advantage.
It’s clear, therefore, that resilience matters – it’s the backbone of modern, agile supply chains. It ensures business continuity amid a storm of potential disruptions.
Examples of supply chain vulnerabilities
At the heart of supply chain vulnerabilities are:
- natural disasters
- geopolitical tensions
- pandemics
- and more
Each of them is capable of causing ripples throughout the global trade network.
Natural disasters
For instance, the eruption of the Eyjafjallajökull volcano in Iceland back in 2010 threw the airline industry into chaos, grounding flights and halting the movement of goods. The Sundhnúkur eruptions of late 2023 and early 2024 also put the industry on alert, but fortunately this time there were no major flight cancellations or delays.
Meanwhile, a severe drought impacting the Panama Canal led to restrictions on daily ship crossings, further exacerbating the strain on global trade flows.
Geopolitical tensions
Similarly, geopolitical tensions such as the trade wars between the US and China have led to tariffs and trade barriers that may disrupt the flow of raw materials and finished products alike.
Great turmoil was also caused by the war between Russia and Ukraine, which escalated in 2022. It has been a tragic humanitarian crisis and a disruption to global supply chain networks, affecting energy supplies, agricultural commodities, and raw materials.
The fragility of international trade was also shown during the blockade of the Suez Canal. In the early months of 2024, there was a staggering 50% drop in trade volume there compared to the previous year, as attacks on vessels in the Red Sea prompted many shipping companies to reroute around the Cape of Good Hope. This decision added over 10 days or more to delivery times.
Domestic political decisions
Moreover, domestic political decisions, such as Brexit in the UK and tax changes, are adding to the mix. Many insights reveal the profound impact Brexit has had on the UK economy, particularly within manufacturing, highlighting the challenges of adjusting to a new reality of international negotiations and altered political significance.
These challenges are compounded by repercussions of not being part of a customs union, all of which are magnified by the UK’s shifting political landscape.
Pandemics
The COVID-19 pandemic stands as a stark example of how a health crisis can become a major supply chain challenge.
Lockdowns and factory shutdowns across the globe led to a sudden halt in manufacturing operations, revealing the fragility of lean supply chains and the just-in-time inventory strategy many companies rely on. This crisis highlighted the vulnerability of critical supply chains and caused widespread shortages of everything from consumer electronics to automobiles.
Uncontrolled accidents
In addition to these systemic vulnerabilities, uncontrollable situations like accidents further compound the risks within supply chains. Even with the most meticulously planned logistics strategies, unforeseen events can disrupt the flow of goods and demonstrate the unpredictable nature of global trade.
The Manufacturing Outlook Q1 2024 from Make UK and PWC discusses how external uncontrollable factors, such as the tensions in the Red Sea, are increasing disruptions and causing manufacturers to turn to digital innovation. By investing in energy efficiency, skills development, and cutting-edge technologies, manufacturers are striving to create a more sustainable and efficient supply chain.
The pillars of a resilient and modern supply chain
Supply chain disruptions have become the norm rather than the exception to the rule, hence why building resilience is a must. But you can’t do this without having at least basic knowledge.
There are some pillars that every resilient and contemporary supply chain rests on: flexibility, visibility, collaboration, diversification, and technology. When combined, they ensure supply chains can withstand shocks, recover quickly from disruptions, and adapt to the changing landscape of trade.
Flexibility
Adapting to changing circumstances is a cornerstone of supply chain resilience. Flexible supply chains can quickly adjust to demand fluctuations, supply interruptions, or changes in the market environment. With flexibility, businesses can respond proactively to challenges, minimize impact, and maintain continuity.
Visibility
Having clear insight into every part of the supply chain is also crucial, since otherwise you can’t identify risks or opportunities. Visibility enables supply chain managers to monitor the flow of goods, information, and finances. It also allows for timely decisions and interventions to avoid potential disruptions.
Collaboration
Working closely with suppliers, partners, and customers contributes to a more responsive and integrated supply chain. Strong relationships and open communication channels facilitate the sharing of information and resources, enhance the collective ability to navigate challenges, and leverage opportunities for improvement.
Diversification
Spreading risk across multiple suppliers or regions helps insulate the supply chain from localized disruptions. Thanks to diversifying sourcing, manufacturing locations, and logistics providers, companies can reduce their sensitivity to events that may impact specific areas or suppliers.
Technology
Advanced technologies like AI, blockchain, and IoT offer unprecedented levels of efficiency, accuracy, and transparency. Working with the right technology partner or investing in bespoke software development can lead to significant competitive advantages, as well as enable real-time tracking, predictive analytics, and smarter decision-making.
These technological tools improve day-to-day operations, strengthen overall resilience, and make an organization’s supply chain more adaptable to challenges.
Steps to building resilient supply chains
Now let’s take a look at the actual steps you need to take in order to strengthen your supply chains against an array of potential disruptions.
#1 Assess risk
Start by analyzing internal operations and external forces that could lead to disruptions. By identifying weaknesses, for example, from dependence on single sources to exposure to geopolitical tensions, you can prioritize risks and prepare more effectively.
#2 Plan for multiple scenarios
Once risks are identified, the next step is to develop contingency plans for various scenarios. But this doesn’t just mean planning for the most likely disruptions – remember about the unexpected ones as well (a perfect example here is the outbreak of a pandemic in 2020). Such scenario planning allows your supply chain to remain agile and able to pivot quickly in response to unforeseen events.
#3 Build strong relationships
Cultivate robust partnerships with key suppliers and stakeholders to enable a more cohesive response to challenges. Strong relationships facilitate better communication, collaboration, and mutual support that all make the chain more resilient.
#4 Invest in technology
Implement the right tools, such as AI for predictive analytics or IoT devices for real-time tracking, in order to transform how supply chains operate through enhanced visibility and efficiency. Also remember that every technological investment should be strategic, so focus on solutions that offer the greatest impact on resilience and operational effectiveness.
#5 Regular review and adaptation
Building a resilient supply chain requires regular reviews of operations, strategies, and the external environment to identify new risks and opportunities. This continual process guarantees that the chain strategies stay relevant and effective, and enables organizations to navigate the complexities of the global market confidently.
Digital tools to enhance supply chain management
Technology and digital tools are the basis of robust management of the supply chain. What can they do in different fields that make it worth placing a bet on them?
Advanced analytics and AI
Artificial intelligence enables predictive analytics and sophisticated decision making. It can forecast demand more accurately, identify potential disruptions before they occur, and suggest optimal responses. Thanks to analysing vast amounts of data, AI helps businesses stay ahead of market trends and significantly reduce the risk of inventory shortages or surpluses.
Blockchain for transparency and security
Blockchain technology offers a secure and transparent way to record transactions and track assets in a supply chain. By creating a decentralized ledger that is accessible to all involved parties, blockchain enhances trust among stakeholders. It ensures the authenticity of products by providing a tamper-proof record of their journey through the chain, from origin to end consumer.
IoT for real-time tracking
The Internet of Things connects physical objects to the web and allows for real-time tracking and monitoring of goods and assets across the chain. IoT devices can monitor the condition of products, track their locations, and even predict maintenance for equipment. These accurate insights into supply chain operations allow companies to respond swiftly to any issues that may arise and thus improve customer satisfaction.
Cloud computing for collaboration
Cloud computing facilitates seamless collaboration, as it offers a centralized platform for data storage and sharing that enables all parties in the chain to access up-to-date information. Cloud computing solutions are scalable and flexible, allow the user to adapt to changing needs, and increase the scale of operations without significant upfront investment in IT infrastructure.
As you can see, the benefits of using digital devices, cloud-based solutions, and IoT devices are abundant for supply chains. If you want to improve your global supply chain performance and build resilience, trust technology – with its help, you can overcome critical supply chain risks.
Leverage technology for supply chain resiliency
If, until this moment, you weren’t sure whether or not you needed a resilient supply chain, now you shouldn’t have any doubts. The backbone of such a chain lies not just in strategic planning, but also in a sophisticated use of technology and digital tools.
The deployment of these technologies ensures that supply chains are not only equipped to handle today’s challenges, but also future-proofed against tomorrow’s disruptions. However, harnessing the full potential of these digital tools requires expertise and innovation.
That means a partnership with technology experts who can help with your unique supply chain needs. Inwedo’s approach to crafting bespoke software solutions means that technology is not just an add-on, but is integrated into the very fabric of your supply chain strategy.
Lverage technology for a stronger and more resilient supply chain
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