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The Importance of Supply Chain Resilience

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The Importance of Supply Chain Resilience

Acknowledging potential weaknesses in your supply chain before they are exposed by elements beyond your control is of critical value. With current events in mind, managing future supply chain disruptions will be an integral component of corporate strategy. Calling it Supply Chain Resilience, Supply Chain Disruption, or Business Continuity Management (from the ISO 22301 standard) does not affect the necessity of having strategies in place that may make the difference between following or leading in a disrupted economy, and even between surviving or folding.

To identify potential soft spots, a review should not be limited to a single product flow or single supply chain element. For any company, the next big disruption does not have to be a pandemic; it can be something minuscule on a global scale, yet have the same devastating effect on the ill-prepared in particular trade lanes or in a particular industry. Unpredictable is not a reason to be unprepared. Creating supply chain resilience is a holistic exercise that involves more than just a few savvy logistics people. HR, finance, compliance/legal (to name a few) are all stakeholders in a healthy case of business continuity management.

How then to build a strategy? Like any other strategy, the process seems logical: review, assess, and mitigate. In this particular case: 1) review your tradelanes, products, and materials flow by matching them against risk categories (i.e., labor, business risk, global trade, nature, and materials), 2) assess risks for each combination, and 3) mitigate risks by either changing behavior now or planning for alternate (sourcing) options should the anticipated risks become reality.

Trade Lanes and Risk Categories

The relevant components to review within the supply chain include the importing and exporting country or countries, the manufacturing locations, the finished goods, and the (raw) materials. Ideally, for finished goods and materials, the associated Harmonized System (HS) codes are made available. Scratch what does not apply and move to the following step where each of the ‘inputs’ is categorically reviewed.

As mentioned, this should not be an exercise limited to supply chain professionals. For example, labor risks can be associated with the likelihood of strikes, wage volatility, and the availability of appropriate labor resources—not necessarily areas that keep the supply chain brain occupied every day.

In a similar fashion, other resilience elements expand across different areas of expertise. Business risks relate to cybersecurity, corruption, counterfeit products, and the chance of entering into business with bad actors that are on (any of the) denied party lists.

Global trade accounts for the compliance requirements related to the shipment of goods (i.e., licenses, documentation, permits, etc.), associates the products with the various duties and taxes, and identifies if Free Trade Agreements(FTA) apply and how to qualify for preferential treatment.

Arguably the most unpredictable, but not the least expected risk to account for, is nature. It’s important to identify the various kinds of disasters that may hit: natural hazards, pandemics or epidemics, flooding, earthquakes, hurricanes, volcanic eruptions, landslides, or drought can all play parts.

Lastly, consider materials. Understanding the market comes with insights into scarcity, sourcing locations, and price fluctuations.

Risk Assessment

Risk assessments match the input with the risk categories. For example, how vulnerable is the manufacturing location when it comes to labor regulations, corruption, or flooding? Is there an FTA in place that could potentially lower the import duty burden? Where in the supply chain can a cyberattack be most expected? In short, some homework is in order to create a thorough risk profile.

For many components, the sources are readily available, such as the Corruption Index at transparency.org, labor statistics on Statista or NationMaster, or duty rate information from the various global trade content providers (or the WTO).

Building Resilience

As with cyber-security risks (PEN tests) or a regular laptop virus scan, supply chain risk assessments will point out the components that need immediate attention or, in this case, are a high priority for alternate sourcing or routing options. It’s then time to build that resilience.

Look for options by analyzing the market and tradelanes. Mine import and export data to identify alternative sources for goods and materials, even manufacturing locations. Map out alternative routes for products to get where they need to go. Document the reasonable options and share with as many people as possible—preparedness is, of course, an all-inclusive strategy.

Next and where possible: test run! Re-route shipments temporarily or source occasionally from a new supplier; in other words, make sure the alternative options are viable. In addition, communicate with external sources that would be part of continuity plans. Make them aware they are part of these plans; put people or suppliers on a retainer and try to agree on terms before disaster strikes so the projected costs can be anticipated better.

Lastly, keep those alternate plans up to date; otherwise, it may be too late to create and execute on alternate alternative plans.

Descartes

Shipping Support Consolidated with Descartes ShipRush™

Descartes’ cloud-based ecommerce shipping solution ShipRush™ now provides customers increased visibility through its added less-than-truckload (LTL) freight management options.

The global logistics solutions provider announced the adding of LTL freight to the offering, further increasing efforts in streamlining shipping operations while supporting companies as they determine carriers and efficient service options.

“Descartes continues to drive ecommerce shipping innovation by bringing together LTL freight, parcel shipping and rate shopping on a cost-effective platform for ecommerce companies,” said Troy Graham, Senior Vice President, Business Development for Descartes Systems Group.

“These combined capabilities help companies, like ZUP, remove the guesswork from choosing the best combination of cost and service for their shipments.”

“As a multi-channel business, ZUP’s shipping needs are complex. We process both individual marketplace orders and large palletized orders for our network of dealers,” said Nick Kierpiec, director of operations for ZUP.

Beyond increased visibility with its all-in-one capabilites, ShipRush™  supports customers in determining the most cost-effective options for LTL management and usage. The platform assists in how and when to use LTL and can produce bulk shipping savings up to 50 percent while offering access to integrated Enterprise Resource Planning systems (ERP) and carrier rate selection processing.

“The ability to do everything in one platform, including process incoming orders and rate shop the best price and delivery options for parcel and LTL, saves us both time and money,” concluded Kierpiec.