Five Steps to Supply Chain Resilience
Supply chain disruption can occur at many levels – from localized warehouse events – for example, fire or flooding – up to regional/global network failure caused perhaps by a major natural disaster or, as we know only too well, a pandemic.
Although managers cannot predict the type of disruption which may occur, its severity or when it will take place, they can make operations and supply chains more resilient by developing a programme of risk management practices. Supply chain managers should be asking:
- What can happen and why?
- What are the consequences?
- What is the cost and duration of the disruption?
- What is the probability of its future occurrence?
- What factors mitigate the consequences of the risk or reduce its probability?
There are five straightforward steps that can be followed to increase resilience.
- Identify all significant risks by auditing every step in your logistics and supply chain process. From this list identify the most urgent risks to your organization.
- Analyze these major risks – look at the risk causes and consequences.
- Move onto the mitigation stage. Having identified the risks, it is necessary to identify courses of action that would prevent them from occurring. As this process takes place, each stage needs to be documented and a ‘risk register’ created which will allow the status and risk treatment plans to be tracked.
- After the initial assessment and mitigation phase, a programme of ongoing risk management needs to be put in place. This will review how risks are being managed on a regular basis and identify new and emerging risks. Put together a ‘playbook’ which details your company’s response to disruption.
- Finally, build risk awareness into your business planning, taking into account risks to overall corporate objectives.
Enhancing supply chain visibility is a fundamental part of the process. At a corporate level, this will involve auditing several tiers of suppliers to identify potential bottlenecks. Operationally, it may mean ensuring real-time visibility of shipments and the ability to re-route consignments to avoid potential disruption.
Obviously, the scale and complexity of this task will differ from company to company. However, every organization is vulnerable to similar external risk categories. These include Economic (e.g. demand shocks, supply shocks, oil volatility, trade disruption and industrial action); Environmental (e.g. natural disasters, climate change, pandemics); Societal (ethics and corporate and social responsibility); Security (e.g. cargo crime, terrorism, corruption and piracy) as well as Technological (not least cyber-crime).
Although you never know when disruption is going to occur, or indeed its origin, by putting in place a ‘risk-agnostic’ programme, you can improve your company’s ability to maintain operations throughout a supply chain crisis. It may even mean that you gain an advantage over competitors who are not so well prepared.