The Beginner’s Guide to Supply Chain Resilience

Over the last few years, businesses around the world have faced massive disruptions to their supply chains. From the Fukushima disaster to the Suez Canal crisis and looking through global trade post-pandemic, supply chains face disruptions on a scale that was unheard of a few decades ago. If the recent Russo-Ukrainian war has proven anything, it is that supply chains will always have disruptions and supply chain resilience is the need of the hour.

The problem with global supply chains is that they are very sensitive to change. Given how common disruptions are becoming, a supply chain needs to be resilient.

Supply chain resilience is not a new concept. However, according to industry experts, only around 21% of businesses around the world have resilient supply chains. This brings us to the elemental question – What is supply chain resilience and how can one go about building a resilient supply chain?

What is supply chain resilience?

Supply chain resilience is a businesses’ ability to survive disruptions within their businesses’ supply chain without major setbacks. To simplify, a supply chain is resilient if a business manages to react to supply chain bottlenecks and disruptions efficiently and effectively. Resilient supply chains can help businesses survive major disruptions without affecting their customer base or markets.

The need for supply chain resilience

Post WW2, businesses have always focused on minimizing costs, minimizing their inventory needs with effective allocation, utilizing existing assets to ensure a flow of goods rather than relying on stocking and facilitating more flexibility.

However, this strategy is fragile. Take the impact of the semiconductor shortage in the automotive industry as an example. Most automotive manufacturers rely on the same suppliers for microchips and semiconductor circuits.

Since they work on assembly lines, asset utilization is key to ensure that the lines keep ‘flowing’. The shortage in processor chips completely crippled assembly lines for a lot of automobile manufacturers even though it is probably a very small component in their fully-realized product line.

Taking the above example, an automotive business with a resilient supply chain would have instead sourced its semiconductors from multiple suppliers and would have had inventory buffers beforehand instead of relying on just one or two suppliers to keep their lines flowing.

Did you know that you can find new suppliers for your raw materials by studying global trade data and supply chains? Trademo Intel compiles global data and provides you with AI-based supply chain intelligence that can help you find the perfect suppliers for your business.

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The semiconductor shortage is just one example. Supply chains face other threats and challenges too. Before we go ahead with creating a resilient supply chain, we need to understand what disruptions a supply chain faces. These disruptions will give businesses a good idea of what to look out for when creating an optimized and resilient supply chain.

Common disruptions in global supply chains

Covid-19 revealed a lot of weaknesses across global trade. Almost every business, regardless of industry, has faced a supply chain disruption between 2020-2022. This phenomenon has been so common that we can call the pandemic itself a supply chain disruptor.

However, the pandemic was a rare occurrence nobody expected. Factors like the pandemic and its impacts are hard to predict before they happen. There are, however, certain disruptions that are relatively easier to predict and to avoid. A resilient supply chain can deal with these disruptions with ease since they are good at avoiding common supply chain bottlenecks.

We’ve created a mini-list of the most common disruptions that supply chains including yours will face:

• Demand surges: This is probably the most common supply chain disruption within global markets. An example would be the ongoing graphic card shortages faced by manufacturers like Nvidia and AMD. On a smaller scale, many eCommerce websites often run out of stock for their products. While demand surges are positive for your revenues, not meeting them quickly can affect your business negatively in the long run.

• Raw-material shortages: Sometimes, it is not your fault. Raw-material shortages occasionally do occur. Many companies tap global trade markets to find the best suppliers for the raw materials they need. Since raw materials for many products are procured from suppliers around the world, there are a lot of problems a particular supply chain can face. Raw materials shortages can happen due to many reasons. Some of them are natural disasters, geopolitical tensions, low productivity, lack of personnel, etc.

• Geopolitical tensions: Geopolitical tensions can be problematic to supply chains. Given how modern-day trade works, businesses often have suppliers and buyers in multiple countries across various continents. Geopolitical tensions can often affect this delicate business balance quite a bit. An example would be the US-China tensions that escalated during the pandemic. These tensions affected a lot of companies and their supply chains.

• Supply chain ‘shocks’: Supply chain shocks are sudden events that a business cannot fathom. Natural disasters, man-made disasters, protests, etc. often come under this category. Thankfully, supply chain shocks are usually short-term disruptions that can be taken care of with proper inventory management and alternative supply chains.

• Logistical delays: These disruptions are rare but can often happen when your supplies get stuck in transit due to compliance issues, or other delays. Logistical delays can be avoided by finding the right freight forwarders in various countries. Studying shipment data with Trademo Intel can help tackle logistical delays by optimizing your supply chains.

3 key characteristics of a resilient supply chain

When it comes to building a resilient supply chain, the benefits often outweigh the costs. Among the various characteristics a supply chain can have, there are a few key similarities in all resilient supply chains. Here is a summary of those characteristics:

Flexibility

Flexible supply chains can often withstand disruptions better than rigid supply chains. Here’s what makes a supply chain flexible:

• Efficient reallocation of resources: The idea is to standardize your processes across various steps of your supply chains. For example, all manufacturing units of a business should have a similar standardized process for production and should train employees to a similar standard. Each manufacturing wing should also have room for overhead as a failsafe. This ensures that when a particular manufacturing wing fails, others can efficiently be reallocated more responsibility and resources if needed. Efficient reallocation of resources also helps your make your supply chain green.

• Multiple supplier relationships: As discussed above, one of the most common disruptions a supply chain can face is a shortage of raw materials. Having multiple suppliers ensures that your supply chain is flexible enough to circumvent raw material shortages.

Supply chain research tools like Trademo can help you find more suppliers and align your procurement needs with the help of accurate trade data and a database of over 6 mn companies around the world.

Efficient management & culture

Resilient supply chains are usually backed by a very resilient organization. Resilient organizations usually share certain common traits with how they treat their own supply chains. Here are a few factors that help them increase resiliency in their supply chain:

• Organizational transparency: An organization where personnel know the company’s strategic goals, supply chain activities, and day-by-day decisions will always cope better in case of a disruption. Better knowledge will help your personnel make better decisions when problems crop up.
• Good work culture: An organization where responsibilities are distributed and the work culture is positive will always deal with disruptions more effectively. A mistake many companies make is acting as if their supply chains are akin to automated assembly lines. Humanize your supply chain and trust the personnel you’ve hired to take responsibility where needed.

Planned strategies for disruption

Decisions taken in the heat of the moment can often be wrong. Every organization must have strategies in place to deal with supply chain disruptions. Companies looking to increase supply chain resilience need to be proactive instead of reactive. This is why they need dedicated strategies for supply chain resilience.

7 supply chain strategies to create a more resilient supply chain

Building a resilient supply chain is made difficult by the fact that it can affect organizational efficiency, increase costs, and require more resources. With modern businesses adopting agile strategies, it becomes necessary to balance efficiency when building resiliency in their supply chains.

The solution lies in creating supply chain strategies that take into account the agile nature of modern businesses. Here are 7 agile supply chain strategies that can help create a more resilient supply chain without impacting efficiency too much:

1. Inventory buffers

Probably the simplest way to increase supply chain resilience, inventory buffers help you ensure that you are ready to take on disruptions with extra stock. Often used in the eCommerce space, inventory buffers can also be applied to other businesses.

There are two ways to create inventory buffers for your businesses. The first is to have an overhead at your production facilities. Having that flexibility allows you to counter disruptions by increasing production when needed. An alternative is to create a surplus stock of your products beforehand.

The second is to create a buffer capacity through flexible contracts with your suppliers. Having flexible contracts with multiple suppliers helps you ensure you can procure more products & materials when needed. The one caveat of inventory buffers is that they can increase your warehousing costs. However, having an inventory buffer has worked wonders for many organizations.

2. Diversified manufacturing

This is a very common strategy among resilient supply chains. Instead of having one major manufacturing facility, resilient organizations establish multiple production and manufacturing facilities in multiple locations. Diversifying your supply chain is no longer an inefficiency but rather the cost of doing business.

In addition, diverse production facilities help standardize processes, ensure multiple suppliers for raw materials, and increase the overall production capacity for demand surges. A diversified supply chain will help circumvent geopolitical tensions and material shortages.

Diversifying a supply chain is a critical business decision that needs to be backed with data insights. With Trademo Intel you can study shipment data to optimize your new supply chains, find buyers/suppliers in new markets, and create data-driven strategies for your diversification. You can learn more about Trademo by requesting a demo!

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3. Supply chain optimization

As goes without saying, optimizing your supply chain is very important. Supply chain optimization can help improve your supply chains and solve bottlenecks. An optimal supply chain is both resilient and efficient.

We have a guide for supply chain optimization currently being baked by our chefs in the writing team! We’ll have it linked here once it’s ready! Until then, here’s a recommended reading from us:

Explore: 8 Supply Chain Optimization Tips

4. Nearshoring

Let’s talk about the elephant in the room first. Nearshoring is an expensive affair for most businesses. However, depending on your business, nearshoring might work out in the long run. In simple terms, nearshoring involves localizing your supply chain to a closer geographical location. Creating a regional supply chain allows you to have better control over your inventories, eliminate geopolitical risks, reduce dependency on global supply chains, and move the final product closer to the consumer.

5. Multi-sourcing

Multi-sourcing is a great way to build supply chain resilience. Having multiple suppliers across the globe helps source raw materials from multiple businesses. However, this requires knowledge of the industries you want to source from and a detailed idea about the various companies within that industry. This is made possible with the help of Trademo and its detailed list of 6 million buyers and suppliers around the world. You can find businesses in various countries with the help of Trademo’s free company search feature.

6. Standardized processes

An excellent way to increase the resilience in your supply chains is by standardizing your manufacturing process. Using interchangeable machinery, personnel, and parts across various manufacturing facilities will help you optimize your business processes to a larger degree. Relying on standard processes will make it easier to adapt to disruptions and deal with demand surges.

7. Production Ecosystems

The past decade has shown that ecosystems work well. Many businesses have digitized themselves with the help of various business suites across various metrics. Creating a similar ecosystem within your supply chains can also be a lucrative opportunity. This strategy, however, works alongside process standardization and diversifying production. Creating a production ecosystem requires you to collaborate with your suppliers and buyers & create a strong commercial relationship with them. Streamlining your buyer-supplier relationships helps you design an effective and efficient ecosystem that will help make your supply chains resilient.

Summing Up

Supply chain resilience is crucial in the post-Covid world. Every business that relies on the global trade market needs to make its supply chain resilient. With the strategies given above and an understanding of the major characteristics of a resilient supply chain, businesses can create their own resilient supply chains.