Supply Chain Resilience
Supply Chain Resilience
COVID-19 pandemic has disrupted the current Supply Chain across industry segments. The organization are struggling at multiple fronts. Right from wondering where their supplies are coming from, to how much to produce. While some of these problems are not new in the supply chain, but this pandemic has thrown it into our faces more than ever.
According to experts, the root cause of these issues is the linear supply chain, inadequate supplier risk management and a high degree of vendor concentration. While these factors result in lowers costs, optimized inventories and economies of scale, the current situation has pushed us to re-think some of these strategies.
Supply chain resilience, for that matter, the strength of every process is a measure of the ability to resist the disruption and speed of recovery from the interruptions. For example, how long are you able to continue your manufacturing when a supplier has issues (resistance), and how soon can you re-start delivering to your customers when the lock-down is lifted (recovery).
We will look at two areas today, i.e. the supply and the distribution resilience.
The key to supplier resilience is the ability to predict the risk and create alternates. Current supplier risk management has two significant issues, i.e. risk is managed only at tier-1 suppliers and mostly at lagging indicators, e.g. financial factors and not taking into consideration the other factors like geopolitical and global factors. Comprehensive supplier risk management is needed to decide if there is a need to take a look like an alternate set of suppliers in a business unit or particular geo. Strong AI and ML models are available to give you an all-round view of your supplier population.
Distribution and fulfilment issues are rooted in the way the organizations manage their warehousing. There is no flexibility built into the warehousing network design, and there is far too much centralization. Industries right now are struggling with either too much inventory, e.g. fashion retail, as there is no movement. On the other hand, the grocery retail and PPE are struggling to complete the demand as there are no inventories. Both situations need just-in-time warehousing. On-demand warehousing is the need of the hour with the ability to buy space with no or minimum capital expenditure. Start-ups like warehousity are trying to solve these problems.
References:
https://www.bis-henderson.com/new-whitepaper-warehouse-space-a-new-strategy-for-a-new-reality
https://www.ey.com/en_gl/advisory/how-to-build-a-supply-chain-thats-resilient-to-global-disruption
