From supply chains disruptions to building and measuring the cost of resilience in a global supply network
Supply chains are knotty machines with multi-tiered, multi-dimensional ecosystems that work together to manufacture and deliver goods. As with any machine, they break down or encounter what is sweetly known as “supply chain disruptions.”
There are always threats, natural disasters, trade wars, political conflicts, or even a -global pandemic that can prove challenging and point out global supply chains vulnerabilities.
This is where resilience enters the scene. In the wake of Brexit, the COVID-19, or the US vs China trade war, many supply leaders are looking at supply chain resilience again.
Is Resilience the Answer to the Supply Chain Disruptions?
Supply Chain resilience is expensive when you look at it. A highly resilient supply chain means good visibility, flexibility, agility, and the capabilities of switching sourcing, manufacturing and distribution rapidly when the global political, economic and social tectonic plates are moving.
Historically, almost everyone has chosen efficiency to the detriment of resilience. Cost is king. If you can produce ten times more in the Far East for the exact cost, you move the production there. This is a reasonably centralised model where efficiency has always weighed more than resilience in a company’s supply chain distribution.
However, with the COVID-19 still here, many supply chain leaders began to discuss the balance between resilience and efficiency. The disruptions caused by the pandemic have revealed the vulnerabilities hidden in the “efficiency model”. Ironically, efficiency comes at a price, and that is the lack of flexibility. Why? Let’s take a look at some supply chain resilience strategies first.
How do You Attain Supply Chain Resilience?
- You set Inventory Buffers
One of the most straightforward ways of ensuring resilience, capacity buffers are usually expensive, and the C-suite will not like them.
- Network diversification
This means switching to new and more suppliers for the same volume, and it’s seen as a practice in the recent China vs US trade conflicts.
Supply chain leaders who know their supplier networks very well could categorise them by spending and revenue impact. In the case of an upcoming disruption, they could switch from one to another.
- Strategic partnerships and relationships with the suppliers that are much deeper level
If there is a shortage of raw materials supply on the market, and everybody is fighting for them, the big customers will always win. So if you’re not a high-profile customer, then your best chance of getting those raw materials to continue production is by having excellent relationships with a great many suppliers and distributors.
To build that relationship, you would jump on a plane, go and have a meal with the distributors, send presents, greetings and all the rest. You can no longer do that today. We might never get back to that level of closeness in the near future, either. And it is clear that you cannot do that via Zoom.
So, the obvious solution is having people on the ground, closer to these critical suppliers, to build those relationships and negotiate in your name. However, this could prove a challenging model to manage. You just can’t have that many employees working full-time on that limited amount to do. You could hire temporary workers or get someone to do it for you, like BDD.
How to Build Supply Chain Resilience in an Efficient Way
You could hire tens or hundreds individuals to sustain local suppliers’ relationships, monitor and collect data, but that costs a lot of money, and a lot of time will go just in managing these employees.
So you need to find a solution where you can maintain these long-distance relationships, negotiate with each of your suppliers, monitor and collect the data you need without it becoming too expensive.
Biz Dev Dynamics brings this ability to the table: you can have eyes in every room and the fingertips on every suppliers’ capabilities by working with independent contractors from all over the world. Managing them is a full-time job, so Biz Dev Dynamics is doing it for you at very affordable prices.
This solution will also answer the question of visibility and transparency throughout the supply chain. How much do you see from what is happening? You must have the data; you must have people on the ground reporting to you.
IS Artificial Intelligence for you?
Sometimes AI is just a buzz word that can prove highly inefficient. Especially if you are an SME manufacturing small batches. If you’re building 10,000 units a year, you’ve got 10,000 pieces of data, and that’s not enough to prompt you to invest hundreds of thousands of dollars into digitalisation and AI tools for your supply chain.
AI depends on scale, and looking at where the costs stand at the moment, AI is usually not relevant for small-to-medium companies. The human factor is the most important.
Why Do I need a Resilient Supply Chain?
Measuring the cost of resilience indeed seems like an impossible task, and many supply chain leaders might assume it is pointless to think about resilience in the first place.
For example, if you move one of your production facilities on-shore from a low-cost country to your “home”, there’s an inevitable cost impact. How do you measure that cost vs the benefit of the resilience it brings?
How do you look at this equation? You usually run some scenarios. For example, what happens if I close my factory in Albania for six months? How much does that cost me?
Then you set that cost against building second sources of supply, working with more suppliers for the same volume, managing more manufacturing centres, or working with BDD on providing supply chain optimisation.
We’re humbled to say the cost of that last option is much less than having to cope with significant supply chain disruptions. Let’s talk!