Building Supply Chain Resilience With Strong but Flexible Links
Supply chain resilience is the backbone of business continuity, enabling organizations to anticipate, adapt, and swiftly respond to disruptions.
In 2011, automotive giant Toyota faced a monumental challenge. Following a catastrophic earthquake and tsunami in Japan, Toyota’s production plummeted by a staggering 62%. The culprit? A fire at a factory where it sourced semiconductors.
However, the impacts could have been much worse if not for the company’s strong business continuity plan, diversified supply chain, and effective communication with suppliers and other stakeholders. Compared to other manufacturers relying on single-source suppliers in the area without buffers, Toyota was able to resume production capacity within months and minimize revenue loss.
This example underscores the critical importance of supply chain resilience. Just as a single short-term supply chain disruption could devastate a company, proactive measures to enhance resilience can turn crises into opportunities for growth and innovation. In this blog, we aim to make resilience actionable and achievable.
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Global Supply Chains Are More Complicated Than Linear Links
The term “supply chain” is a misnomer. Very few businesses today run on a linear production model that allows them to create and deliver an entire product from beginning to end. As in the Toyota example, critical supply chains are more accurately described as intricate networks, with multiple interconnected nodes, suppliers, and processes. Ecosystems.
This is especially true as more businesses have adopted just-in-time manufacturing approaches that optimize efficiency by minimizing inventory and streamlining production processes. However, this increased interconnectedness also introduces vulnerabilities, as disruptions at any point in the network can reverberate throughout the entire supply chain.
Whether you’re a global automotive giant like Toyota or a small local retailer, supply chain resilience management is critical for fortifying your business against threats. But in order to be resilient, you need a clear understanding of the risks that your supply chains face.
Shoring up an unpredictable supply chain
We face intensifying climate change-related threats, novel cyberattacks, large-scale geopolitical instability, and heightened violence. It’s crucial for businesses to implement strategies for eliminating supply chain vulnerabilities. The foundation of this supply chain resiliency rests on six critical pillars:
These six pillars work together to make a company’s supply chain more resilient, ensuring it can effectively withstand and recover from various disruptions. This all starts with diversification.
6 Steps to Improve Supply Chain Resilience
1. Diversify your supply chain
Whether a business is attempting to shore up financial resources or protect its critical infrastructure, diversification is a tried-and-true risk mitigation strategy. The Biden administration cited an analysis in its own supply chain resilience strategy that found diversification could reduce GDP losses for U.S. companies by more than half.
By using a wider range of smaller supplier networks rather than relying on a few large ones, companies are better able to pivot when the unexpected happens. Toyota adapted this strategy to recover from its own supply chain challenges. The company created a tiered system of suppliers, cleared up expectations, and reviewed processes to ensure a robust and resilient supply chain ecosystem.
Additionally, diversifying supplier networks allows businesses to spread their risk across multiple partners, reducing the impact of disruptions from any single source. This approach not only safeguards against potential supply shortages but also fosters healthy competition among suppliers, driving innovation and efficiency throughout the supply chain.
2. Employ real-time risk management
Assessing and reassessing risks to business resilience is crucial for maintaining readiness and adaptability in today’s dynamic business environment. Here are several ways to effectively evaluate and mitigate risks:
- Conduct regular risk assessments: Schedule periodic risk assessments to identify potential threats and vulnerabilities to business resilience. This involves conducting a business impact analysis on internal processes, supply chain dependencies, market conditions, and regulatory changes that could pose a threat to operations.
- Use scenario planning: Develop various scenarios based on potential disruptions, such as natural disasters, pandemics, cyberattacks, or supplier closures. Taking an all-hazards approach is especially important here, as supply chain risk factors are so broad.
- Monitor emerging trends: Stay informed about industry trends, technological advancements, geopolitical developments, and other external factors that could influence company resilience.
- Review historical data: You can also gain a lot of insight from the past. Analyze previous incidents and disruptions to identify patterns, lessons learned, and areas for improvement. Assess how well previous response strategies worked and incorporate feedback into future resilience planning.
- Benchmark against industry standards: Compare your resilience practices against industry benchmarks and best practices. Review supply chain assessment models of those in your industry to learn from peers and gain insights into emerging trends and strategies.
- Leverage technology and data analytics: Leverage technology solutions and data analytics tools to gather real-time data, monitor performance metrics, and detect early warning signs of potential disruptions.
By incorporating these strategies into your risk assessment processes, you can enhance your organization’s ability to identify, mitigate, and manage threats. This will also help you train your employees so they are prepared to adapt to these disruptions.
3. Enhance your workforce’s adaptability
In supply chain resilience, adaptability refers to an organization’s ability to effectively respond and adjust to disruptions or unexpected events. More specifically, it refers to how your people are able to maintain continuity and minimize the impact of disruptions on operations. Companies can nurture this adaptability through training programs and drills.
Tabletop exercises are one such training method that can significantly contribute to enhancing adaptability in supply chain resilience. These exercises involve simulating different scenarios, such as supplier failures, transportation delays, or natural disasters, and guiding employees through the decision-making process to address these challenges effectively. This allows them to practice their response to expected and unexpected events and improve before an actual disruption happens.
However, adaptability goes beyond just participating in tabletop exercises. It encompasses a broader mindset and organizational culture that encourages proactive problem-solving, flexibility, and innovation. Companies that prioritize adaptability invest in ongoing training and development initiatives to ensure employees are equipped with the skills and knowledge to navigate unpredictable situations.
4. Commit to visibility and transparency
It’s difficult to identify the most significant disruptions without transparency. You must be aware of the threats and have a planned response if you’re going to react effectively. At its core, transparency is all about communication. Everyone can seamlessly share information and access up-to-the-minute details that help them adapt and absorb shocks as they come. To illustrate this, we can examine how a company with a limited view was able to transform its operations by changing how it approached workforce communications.
A supply chain resiliency example from GSC Logistics
Transportation company GSC Logistics learned the need for end-to-end transparency when assessing its own ability to adapt. Prior to working with AlertMedia, the company had a limited view of potential disruptions as it lacked a cohesive communication strategy. Workers were dependent on phone calls and text messages to communicate important information about traffic issues and road conditions that could affect shipments. This resulted in a cumbersome process that delayed important notifications and limited transparency.
To correct this problem, GSC switched to AlertMedia’s emergency communication system, using a two-way platform that allowed them to reach all their workers instantly. This built transparency into their chain and efficiency in their dispatch processes.
With improved transparency and communication, GSC Logistics not only enhanced its ability to adapt to disruptions but also strengthened its overall resilience. By prioritizing transparency as a cornerstone of its strategy, it positioned itself to navigate future challenges with confidence and agility.
Transparency is not just a buzzword; it’s a fundamental aspect of effective supply chain management. Companies that prioritize transparent communication are better equipped to navigate uncertainties and emerge stronger from disruptions. Of course, the tools businesses use to provide transparency are just one part of it. Another critical component is collaboration.
5. Connect through collaboration
A resilient supply chain rests on a collaborative workforce. Just as all links in the chain must work seamlessly together, all elements of the organization must collaborate effectively. From procurement to distribution, each department plays a vital role in fortifying the chain against disruptions. This collaborative effort fosters a proactive approach to risk management and enables swift responses to unforeseen challenges.
A recent interview with John Liuzzi, National Director of Business Continuity at Southern Glazer’s Wine & Spirits, featured in The Employee Safety Podcast, can help you better understand the power of collaboration.
Southern Wine & Glazer’s collaborative approach to resilience
John Liuzzi’s strategic approach to ensuring supply chain resilience at Southern Glazer’s Wine & Spirits is a prime example of the role of collaboration in mitigating business risks. As National Director of Business Continuity, John recognized that effective collaboration was essential for fortifying the company’s supply chain against disruptions. By working closely with various stakeholders, he cultivated a proactive mindset toward risk management, enabling swift responses to unforeseen challenges.
Here are key initiatives John undertook at Southern Glazer’s to bolster supply chain resilience:
- Fostered organizational alignment: Focused on aligning business continuity objectives with broader organizational goals and metrics, ensuring that resilience efforts were integrated into daily business operations.
- Developed a strategic vision: Articulated a clear vision and strategy for the business continuity program, outlining its role in supporting the organization’s growth and adaptation to changing market conditions.
- Cultivated cross-functional collaboration: Promoted collaboration across different departments and disciplines, encouraging the exchange of information and best practices to enhance resilience and preparedness.
- Implemented technology solutions: Leveraged technology solutions and data analytics tools to gather real-time data, monitor performance metrics, and detect early warning signs of potential disruptions, enabling proactive risk mitigation.
- Emphasized employee training and awareness: Prioritized employee training and awareness programs to ensure that all staff members understood their roles and responsibilities in maintaining business continuity and responding effectively to crises.
Overall, John’s focus on collaboration was instrumental in strengthening Southern Glazer’s supply chain resilience, enabling the company to navigate challenges and adapt effectively to changing market conditions.
By understanding exactly how they fit into the overall operations and continuity of your business, your team is better able to take an active role in helping it succeed during trying times. However, as times change, so will the threats your business faces. That’s why every good supply chain strategy is built on a platform of continuous improvement.
6. Embrace continuous improvement
All the companies we’ve highlighted use continuous improvement as a fundamental strategy. Toyota, GSC Logistics, and Southern Glazer’s Wine & Spirits continually assess their operations, identifying areas for improvement and vulnerability mitigation. After-action reviews play a crucial role in this process, allowing them to analyze past performances, identify shortcomings, and implement corrective measures.
Toyota, for instance, has a long history of embracing continuous business optimization through methodologies like Kaizen. By encouraging employees at all levels to identify and address inefficiencies, Toyota has been able to continuously optimize its supply chain processes, making them more resilient to disruptions. Similarly, GSC Logistics and Southern Glazer’s Wine & Spirits conduct regular evaluations of their supply chain operations, seeking opportunities to streamline workflows and bolster resilience.
By systematically reviewing past performance, you can identify trends, root causes of disruptions, and areas for improvement. This iterative process allows you to adapt and refine your strategies over time, ensuring operational sustainability even during difficult times.
Supply Chain Resilience Is the Backbone
In today’s interconnected global economy, the resilience of your supply chain is not just a strategic advantage—it’s a critical component of your overall business continuity. Disruptions can arise from natural disasters, geopolitical tensions, cybersecurity attacks, pandemics—you name it. By fortifying your supply chain network, you safeguard your operations, reputation, customer trust, and financial stability.
Supply chain resilience is the backbone of business continuity, enabling organizations to anticipate, adapt, and swiftly respond to disruptions. Companies that proactively invest in strong risk management strategies and adaptive supply chain frameworks are better positioned to maintain operational continuity and gain a competitive advantage in their industry.
For more insights on how you can fortify your business against threats, download our business continuity checklist.
