Today’s supply chain has increased outsourcing, more complex product lines, and heightened demand volatility. To improve supply chain disruption, companies often determine risk exposure, prioritize risks based on intensity and vulnerability, and develop mechanisms to monitor risks. Ultimately, managing risk has always been an essential portion of supply chain management; however, instead of only focusing on risk management during supply chain disruption, it is essential to first build a more resilientsupply chain.
What is resilience?
Resilience is a supply chain’s ability to reorganize and deliver core functions, even during and after the impact of an external or internal disruption. A resilient supply can help your company bounce back quickly when disruption occurs.
Furthermore, resilience enhances competitiveness. For instance, supply chain disruptions can create shortages that are similar to demand spikes that cause supply and demand imbalances. As a result, manufacturers with resilient supply chains can react to the changing market ahead of their competitors.
Build a More Resilient Supply Chain
Researchers at the National Center for the Middle Market recommend six steps to create a more resilient supply chain.
Build stronger relationships with inbound and outbound supply chain partners.
Collaboration is a necessary capability when building a more resilient supply chain. Collaboration is the ability to build trusting relationships with supply chain partners. Therefore, focus on partners your company can efficiently collaborate and achieve common goals with, and look for ways to share risks and rewards. Partners may not be the same partners your company does the most business with.
Form strategic alliances with competitors.
When cooperating with competitors, your company gains access to resources and efficiencies that may be in shortage during a disruption.
For instance, Land Rover did not efficiently monitor its supplier base. UPF-Thompson (UPF) was Land Rover’s sole supplier of chassis frames for their Discovery models. UPF unexpectedly went bankrupt in 2001 and Land Rover was not adequately prepared. As a result, Land Rover had to pay off some of UPF’s debt to continue receiving chassis supplies. Land Rover’s story exemplifies that supplies are vital to any manufacturer, and by working with competitors to expand supplier relationships, a company can reduce supply disruption.
Create a cross-functional team.
Supply chains need cross-functional teams that interact with each other during the complete supply chain schedule. Additionally, teams with distributed power feel more permitted to take action when disruption hits. For example, before a potential disruption is even visible to managers or executives, employees close to the action see the problem, respond and enhance the chances of containing a disruption.
Focus on core competencies.
Be cautious about diverting your attention and resources from what your company does best.
Innovate within core competencies.
Investing in innovation ensures your customers that, should a disruption occur, your company is flexible and will recover. Flexibility is being to adapt quickly in response to disruptions and minimize the impact.
Capitalize on employee loyalty.
Employees’ deep company knowledge enables manufacturers to spot problems early on and develop solutions. Additionally, continuous communication among employees is essential. Keep employees aware of strategic goals, tactical factors, and day-by-day business. Therefore, during the chance of disruption, employees know the company’s status and can use that knowledge to make better decisions.
Likewise, employees with a passion for work are willing to put in the time and effort to get their employers through tough times. Therefore, it is vital to make sure employees know they are respected and appreciated. Former Southwest Airlines CEO Herb Kelleher stated “The important thing is to take the bricklayer and make him understand that he’s building a home, not just laying bricks.”
Download our ebook, Evaluating Key Trends in Global Logistics, to learn about manufacturers integrating logistics strategies into core manufacturing operations.