Digging deep: Why supply chain resilience matters

The sum of all parts

Where are you reading this post? On your phone perhaps. Maybe at your computer. Wherever you are and whatever you’re doing, take a moment to think about the device you’re using. It’ll be made from numerous components, which in turn are constructed from numerous materials sourced – in all likelihood – from all over the world.

We live in a time of ease and availability. But what happens when a material we rely on to build something useful to us is, for whatever reason, no longer readily or easily available? Are you able to source an alternative, and are you able to do it promptly enough to ensure that all the other steps in the production process aren’t impacted?

When it comes to creating a complicated product, it’s unlikely that a company is going to know everything about every component and every material that sits within it. They’ll likely know – and have excess stock of – key components, but what about something deep down the supply chain?

However, without full oversight, one missing element can grind the whole process to a halt. Whether through restrictions, regulations, or shortage in supply, not being aware of material availability represents a huge risk to your business. That’s why supply chain resilience is vital. 

Supply chain resiliency is a term that refers to the need for supply chains to be malleable and adaptable, where oversight and planning means that a business is prepared for unexpected events and disruptions within its supply chain to the extent that alternative options are readily available and operational continuity is assured. Or, in the most basic terms, it’s about having the right contingencies in place at the right time.

Looking beyond logistics

In order to make sure that your supply chain is as resilient as possible, deep-tier transparency is key. When most businesses speak about conducting a supply chain analysis, they’re really just talking about logistics. When they talk about automation in procurement, they’re mostly referring to source-to-pay tools. In reality, it’s necessary to take that analysis to a much more granular level. 

It’s estimated that some 90% of value may sit in the upstream supply chain, and yet many businesses don’t even have information – whether that’s data files, transactional data, detail on environmental impact or various other factors – about their tier 1 suppliers. Furthermore, the majority of risk and non-compliance issues occur with suppliers in tier 2 and below, but 65% of companies have no visibility at this level. Why? The reasons are simple: outdated systems, incomplete or scattered data, supply chain complexity and a deliberate opaqueness from suppliers when it comes to revealing ‘secret’ or sensitive operational details. To stay competitive, manufacturing enterprises need to fully understand the risk in the deeper tiers of their product supply chains. The companies that succeed not only create demand but execute on delivery. 

Supply chain analysis needs to encompass everything from raw material extraction to the end-of-life of the products a company makes and sells. By building a complete picture of their supply chain, a business will find itself not only able to understand their lower tier suppliers’ sourcing, regulatory and sustainability implications but to deliver their own results faster and to operate in a more cost-effective manner. 

Solving the issue 

We’ve established that a more resilient supply chain not only drives value but also delivers efficiencies likely to have a major impact on how your business functions. But diving deep into a supply chain is a Herculean task, even for the most advanced teams. Meaningful change is only possible through casting off existing, outdated processes within your organization.  

In order to succeed, collaboration and synergy are essential. Efficient supply chain management and reporting is easily scuppered by a siloed approach, where data scattered across various sources results in slow and costly manual efforts to tie information together.  

Seeking out an automated approach to Life Cycle Analysis (LCA) is one solution. Doing so would enable organisations to not only consolidate and enrich their data, but to perform comprehensive reporting and analysis and make data-driven decisions that will help to minimise risk. 

Now is the time to make dynamic changes at a functional level. The pay-off? Accurate, real-time information through the implementation of a harmonised master data repository. An automated approach – augmented by AI – will allow real-time scenario analyses, reducing friction between departments and helping teams to arrive at the right solution faster. 

Gaining the advantage 

With increased oversight and understanding of earlier production phases, a company is positioning itself to act both more promptly and more effectively in the event of a supply crisis. Identifying issues and alternative solutions in advance offers a crucial advantage over competitors who are not doing the same, allowing your business to optimise your supply chain for cost, environment, compliance and a variety of other factors. 

Businesses, at a minimum, should seek to understand exactly what components their products are made from – to have an understanding not only of the raw materials, but also of where the potential risks and shortages in terms of material availability might lie. Maintaining a strong relationship with suppliers is also crucial, as is as a willingness to monitor and act upon events happening in the wider world – from politics to conflict to emerging regulation. Being ready for supply chain disruption is half the battle. 

In a highly competitive business landscape, it’s the fine margins that make a difference.