Supply Chain
Article

How to Prepare Your Supply Chain for The Next Disruption

by
Automation Alley
November 16, 2022
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Summary

Don't wait until the next crisis hits, when there are tools and strategies that you can apply now that will set you up and prepare you for the unexpected.

Pandemics, natural disasters, cyberattacks, terrorism, logistics delays and failures—if you’re a manufacturer, one or more of these disruptions has likely impacted your supply chain. Are you prepared for the next disruption? If your supply chain isn't ready for the next crisis, it can quickly collapse under the pressure.

However, there are strategies available to help you prepare your supply chain for the next disruption. Below, we’ll explore the steps you can take to stay prepared and tips on how to mitigate the effects of a disruption if one does occur.

Black Swans & Grey Rhinos

There are two types of disruptions: "Black Swan" events and "Grey Rhino" events.

Black Swan events are rare, unpredictable, and have a large impact. They are typically sudden and unexpected, like the 9/11 terrorist attacks or the Fukushima nuclear disaster.

Grey Rhino events, aptly named by business writer Michele Wucker, are more common, but often go ignored until it's too late. They are usually slow-moving and easily foreseeable, such as a product failure, cybersecurity breach, a trade dispute, and even a viral epidemic. These grey rhino events are most often highly predictable, highly probable, and have a significantly high impact.

When it comes to company CEOs, none of them want to see their business significantly impacted by a grey rhino event on their watch. It's not only about reducing the impact of any damage from such an event or disruption, but more so about how, through building a resilient company, you can actually expect to profit in such times of chaos.

CEOs should not only focus on the day-to-day running of their business, but also have one eye on the future. They need to be prepared for disruptions, whether they be black swan (wherever possible) or the more predictable grey rhino events.

Preparing your supply chain for the unexpected

While you may not resonate with the animal analogies, you will certainly understand the impact that a disruption, of any form, can have on your supply chain. Don't wait until the next crisis hits, when there are tools and strategies that you can apply now that will set you up and prepare you for the unexpected.

Create a best-of-class sensing and risk-monitoring operation

This is easier said than done, but it's a critical first step. You need to have a clear understanding of your supply chain and how it operates. This includes having data on all of your suppliers, their locations, their capacities, and their products.

You also need to be monitoring global trends that could potentially disrupt your supply chain. This could include anything from weather events to political unrest. The goal is to identify risks early so that you can take steps to mitigate them.

You have to have a clear view of what lies ahead, in terms of likely risks in the supply chain. This is where the investment in risk intelligence and strategic foresight comes into play. You need to create an experienced team of procurement forecasters, or rather super-forecasters, who are equipped with the very latest in AI(artificial intelligence)-powered sensing technology.

Simplify your product portfolio

The second step is to simplify your product portfolio. This will help you to focus on the products that are most important to your business and to your customers. It will also make it easier to source these products from a smaller number of suppliers.

Think about the products that you sell and ask yourself, "Do we really need all of these?" If the answer is no, then get rid of them. This will help you to focus on the products that are essential to your business and make it easier to source them from a limited number of suppliers.

Consider removing a few of your product lines and adapting the rest of the products by simplifying how they are designed, perhaps standardizing their components, constituent raw materials, as well as what packaging materials they are being stored/transported in.

De-risk your supply chain

The third step is to de-risk your supply chain. This means taking steps to mitigate the risks that you have identified.

One way to do this is to make sure you supplier base is diversified. You need to ensure you have multiple suppliers for each product or component. This will reduce the impact of any one supplier going out of business or experiencing production disruptions.

Another way to de-risk your supply chain is to build up inventory levels. This will cushion the impact of any disruptions in the supply chain and ensure that you have enough products to meet customer demand. This can be a fine balance though, especially when it comes to cash flow. You will need to put a great deal of thought into how you will build up your inventory levels without putting yourself at financial risk. Get it right, and you'll have a nice buffer if you ever need it.

You can also look at alternative sources for your raw materials and components. This could involve sourcing from different suppliers or even different countries. The goal is to have a backup plan in place in case your primary supplier is unable to meet your needs.

And finally, you should always be on the lookout for new suppliers. This will give you the option of switching to a different supplier if your current one is experiencing difficulties. It's also a good way to keep your costs down, as you can pit suppliers against each other to get the best price.

Doing all of these things will help to protect your business from the risks inherent in the supply chain. But it's important to remember that you can never completely eliminate risk. There will always be some degree of risk present, no matter how much you try to mitigate it. The key is to make sure that you have a handle on it and that you are comfortable with the level of risk that you are exposed to.

Getting ready for the rebound

Okay, so you've prepared well and put in place a risk mitigation plan that has been tested, and has passed. Now, you need to get ready for the market rebound.

This is when things can get somewhat intense, as businesses race to restock their shelves and meet customer demand. The last thing you want is to be caught unprepared and miss out on the opportunity to capitalize on the rebound.

Here are a few things that you can do to make sure that you're ready:

1. Review your inventory levels and reorder products as needed.

2. Make sure that your employees are up to speed on the latest changes in the market and customer demand.

3. Review your marketing strategy and make sure that it is aligned with the current market conditions.

4. Make sure that your website and online presence are up-to-date and ready to handle an influx of traffic.

5. Review your supply chain and make sure that it is able to meet the demands of the rebound. This may involve adding new suppliers or increasing inventory levels.

Doing all of these things will help you to be prepared for the market rebound and ensure that you are able to capitalize on it. Get ready now and you'll be in a great position to take advantage of the opportunity when it comes.

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Automation Alley
Automation Alley

Automation Alley is a World Economic Forum Advanced Manufacturing Hub (AMHUB) for North America and a nonprofit Industry 4.0 knowledge center with a global outlook and a regional focus. We facilitate public-private partnerships by connecting industry, education and government to fuel Michigan's economy.

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