Helping Businesses Navigate Through Supply Chain Disruptions
This article was written by guest author David Buss.
Most businesses rely on an effective supply chain, but these fragile and unpredictable ecosystems are prone to disruptions. One issue can quickly ripple out to damage the entire chain, and by extension, your business.
COVID-19 brought supply chain disruptions into the spotlight. Now that the world is returning to normal, the heightened demand is creating even more strain on the already vulnerable supply chain, creating problems for businesses.
Supply Chain Disruptions
Supply chain disruptions can occur when any of the components of the supply chain are impacted. For example, the shortage of truck drivers disrupts the distributor, creating a ripple effect throughout the other people, processes, and organizations further down the supply chain.
Several factors can impact the supply chain, including:
- Demand: The demand for goods can be miscalculated due to poor forecasting or the unpredictability of the market.
- Supply: If products or raw materials are delayed or not delivered, the subsequent products can’t be manufactured or distributed.
- Business changes: Bankruptcies, mergers and acquisitions, or other business changes can disrupt the supply chain.
- Environmental risks: Supply chains may be disrupted by environmental factors, such as economic or political crises, a natural disaster, or a pandemic.
- Manufacturing disruptions: If problems occur in the manufacturing process, the workflow may be disrupted and products are not sold or delivered.
- Shipping disruptions: Mistakes that occur in the shipping process, such as miscalculations or power outages, prevent prompt and accurate delivery of products or supplies.
How to Manage Supply Chain Disruptions
Managing supply chain disruption involves strategies organizations can put in place to stay agile and resilient.
Create a Contingency Plan
The current supply chain disruption may not end anytime soon. But while these large-scale supply chain disruptions won’t go on indefinitely, the supply chain is always vulnerable to disruptions of various types.
Contingency plans help organizations manage these disruptions, not just in the current climate, but even once these issues resolve. The first step in a contingency plan is identifying each stage of the supply chain and considering the measures you could take if that stage was disrupted.
This could include how to address the issue with customers, how to estimate available inventory, and how to access backup inventory. It’s also important to consider how much disruption to each stage of the supply chain you can weather, so you can be financially prepared.
The PPRR risk management model is a helpful strategy used by businesses to create a contingency plan:
- Prevention: Taking steps to reduce the impact of supply chain disruption before it occurs
- Preparedness: Creating a plan for supply chain emergencies
- Response: Developing strategies to address disruptions.
- Recovery: Resuming normal operations with minimal downtime
Audit Supply Chain Vulnerability
Your contingency plan relies on auditing your supply chain and exposing its vulnerabilities. It’s important to consider how vital each point is in the supply chain. For example, if your business is garment manufacturing and you rely on a single supplier for fabric, your supply chain would be vulnerable if you don’t have a backup supplier.
You should also consider the aspects of your supply chain that are high risk, whether from disruptions, financial history, or local environmental factors. Consider what could cause disruptions, how likely it is, and how much of an impact it will have for your organization.
Once you map out this information, you can prioritize which risks and contingency plans should be prioritized.
Back Up Inventory
Stockpiling extra finished products, components, or raw materials helps your organization navigate future supply chain disruptions. Consider what goods are most valuable – or difficult to replace – and how much you should stockpile.
It’s good to stockpile before the seasons that have the highest historic disruption, such as the holiday buying season. You should consider the seasonal factors not only locally, but in your suppliers’ locations. For example, some locations experience hurricanes or monsoons during certain seasons, which may impact the supply chain.
Diversify the Supply Base
A diverse supply base is key to weathering supply chain disruptions. You should have a list of different suppliers for each point in the supply chain and the products or services you offer. Then, if something goes wrong, you have a variety of suppliers to choose from.
It’s also advantageous to choose suppliers in multiple locations or suppliers that have a diverse supply base. In doing so, you may be able to mitigate the impact of supply chain disruptions. For example, if labor shortages cause disruptions in US supply chains, suppliers with factories distributed all over the world provide different options.
Develop Supply Chain Transparency
Supply chain transparency refers to how accessible the processes and organizations in the supply chain are to view and evaluate. Though difficult to achieve and maintain, it’s vital to managing disruptions.
Learn as much as possible about the processes and risks in each stage of your supply chain. Consider technology that improves visibility, such as inventory management tools and IoT platforms.
Supply chain disruptions are out of your control. Proper planning, robust supply chain disruptions management strategies, and third-party logistics companies can mitigate the effects and streamline your processes.
About the Author
David Buss is CEO of DB Schenker USA, a 150 year old leading global freight forwarder and 3PL provider. David Buss is responsible for all P&L aspects in the United States, which is made up of over 7,000 employees located throughout 39 forwarding locations and 55 logistics centers.