Building Supply Chain Resilience: A Business Guide

Timely access to inputs is a fundamental challenge that keeps manufacturers and traders awake at night. The COVID-19 pandemic has presented significant supply chain challenges to our interconnected world. Supply chain disruption has the potential to increase operational costs or totally disrupt business operations. As a business, your competitive edge and sustainability may lie in understanding key supply chain considerations and more importantly in building Supply Chain resilience.

Looking back over the decades, ‘Cost’ has been the most important consideration for both manufacturers and traders as they sourced for inputs or inventory. For many businesses across the globe, China emerged as the cheaper source of goods as businesses sought to meet customer needs at the lowest cost.

Emerging Trends Reshape the Landscape

However, with an evolving economic policy landscape businesses factored ‘Risk’ as a key supply chain consideration as trade friction began ratcheting up and the threat of higher tariffs made manufacturers and traders evaluate cost vis-à-vis the surety of supply.

A New Reality, New Challenges

The COVID-19 pandemic, a Black swan event, shattered supply chain assumptions and brought a third variable – ‘Resilience’ – to the fore.

The pandemic upturned business norms as we know them and exposed vulnerabilities in the global supply chain. Manufacturing firms and traders experienced delays or disruptions due to production and freight constraints. This presented persistent challenges that were hard to resolve through short term measures. Consequently, ‘Cost’ and ‘Risk’ have ceded ground to ‘Resilience’ as the key supply chain considerations.

The Significance of Supply Chain Resilience for a Business 

In the broadest sense, Supply Chain Resilience is about building capabilities that enable a business to quickly pivot in response to unexpected demand and/or disruption. This agility is essential in reacting to disruption.

Resilience is of critical importance to a business as demands by consumers place extra demands on the supply chain. It becomes a real problem when your customers are unsure that your business can maintain ‘business as usual’ in the face of disruption as this has the potential to disrupt their own operations.

Thus over-reliance on a single sourcing partner or market is problematic for any business be it an international supplier serving markets across the globe, or a local trader sourcing inputs abroad.

On the other hand, the growth and popularity of E-commerce makes Resilience valuable as speed and agility is critical in responding to heightened demand.


Actionable Ideas for Businesses looking to Build Supply Chain Resilience

The World Economic Forum lists Black Swan events like the COVID-19 pandemic as a global risks which will occur frequently going forward. The pandemic highlighted the importance of ‘Resilience’ and demonstrated that no business is immune to supply chain crises. Without alternative suppliers, supply chain disruptions can be costly and particularly damaging for a business.

Accordingly, in the post-COVID era businesses must reduce their level of exposure to supply chain shocks in order to operate profitably and in a more sustainable way. To do so they must rethink their sourcing strategies in regard to where and how they source.

So what are some actionable strategies that businesses looking to build Supply Chain Resilience should consider? One strategy to build Supply Chain resilience is to diversify sourcing by expanding your supplier networks and if possible opt for regional suppliers. Having multiple sources of inventory or inputs helps minimize your risk as opposed to putting all your eggs in the ‘lowest cost’ basket.

A second strategy is to embrace Resilience Planning that will help the business remain competitive and sustainable. Resilience Planning is about being prepared to manage any disruption to ensure uninterrupted provision of service to your clients. This quick reaction to changes fosters trust between customers and suppliers and will be a major differentiator and source of competitive advantage.

A third strategy is to restructure operations to reduce costs and enhance fulfillment options. It is about rationalizing your operations and striking a balance between being efficient and building resilience.