Historically, supply chain risk management approaches tended to be responses to disruption rather than intentional, proactive strategies to mitigate risk. The long-term upheaval caused by Covid-19 magnified the limitations of such approaches: reacting to extended disruptions became highly ineffective, significantly delaying recovery and placing revenue, profit, and reputation at risk. Facing such unprecedented scenarios, supply chain leaders could no longer rely on these approaches, and they began to shift to more proactive strategies.
The journey to a resilient supply chain
Companies have begun to recognize the need to align their risk appetite with exposure to the risks in their supply chain. This alignment is critical, as it helps businesses to identify the risk mitigation capabilities they need to achieve their strategic objectives even during periods of disruption.
Enhanced supply chain risk visibility and investment in resilience emerged as the two most crucial risk mitigation strategies.
Visibility is crucial
End-to-end supply chain visibility – from raw material acquisition to customer delivery – enables you to mitigate potential risks as they emerge. With such visibility, you can proactively deploy resilience strategies to mitigate disruption.
One of the greatest benefits of end-to-end visibility is the ability to monitor supplier risk. These risks can take many forms, so accurate and comprehensive data and analytics are essential. A complete view of financial, sustainability, reputational and operational supplier risks helps companies with complex supply chains and distribution networks to make better decisions. Investing in data that you trust is key – accurate data lets you run a range of scenarios and make informed decisions. Many organizations use a third-party data source to provide the reliability they need.
Investing in resilience strategies
Investing to make your supply chain resilient can help your company avoid, offset, or minimize the impact of disruptions. Common strategies include building up buffer inventories, developing supplier diversity, redesigning manufacturing and distribution networks, rationalizing stock-keeping units, and ecosystem collaboration. Although building resilience is a cost, it brings measurable benefits. According to Bain & Company, a resilient supply chain can increase plant output by 15–25% and customer satisfaction by 20–30%.
Is the worst over?
Although much of the pandemic-related disruption is over, risk has not disappeared from supply chains. Companies are therefore continuing to develop proactive approaches to supply chain risk, even in our high-inflation environment. According to a survey by Gartner, 79% of supply chain professionals at large organizations are taking steps to be more proactive and better prepared for disruption.
Investing in visibility and resilience can help your company gain a competitive advantage by:
- Maintaining revenue and profit by keeping products available even during disruption
- Focusing resources effectively and efficiently
- Reducing the financial impact of disruptive events
- Bolstering your reputation with stakeholders and customers as you demonstrate consistent service and expense management during disruption
Supply chain disruptions aren’t going to disappear. By investing in risk management capabilities such as visibility and resilience, you can ensure your organization has the agility to weather disruption and gain a competitive advantage.
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