Fortifying Supply Chains: How to Navigate Today’s High-Risk Global Trade Landscape
Efforts to make supply chains stronger are as old as supply chains themselves, but today’s global networks necessitate a more proactive, continual, and detail-oriented approach. Even if you have a resiliency plan in place, now is the time to reassess your preparedness.
Read also: Resiliency, Wherever You Can Get It: Uncertainty In Global Supply Chains Is Going To Stay
Few endeavors are more central to the pursuit of global trade than the effort to create a stronger supply chain. But despite this, far too many organizations fall victim to risks they could have mitigated.
In fact, most of the challenges supply leaders face are not new. Geopolitical tensions, warfare, piracy, natural disasters, pandemics, and weather events are age-old risks. What is new is the frequency with which they occur.
Most supply chain professionals could not have envisioned a global pandemic that led ocean transportation costs to increase by 1,000%, the continual and high-impact threat of cybercrime, or concurrent global conflicts. This is the current high-risk environment in which global trade is conducted. It is also why it has never been more important for leaders to reassess how to make their supply chains stronger and to revisit their supply chain resiliency plan.
On its most fundamental level, supply chain resiliency comes down to having an actionable risk management plan in place – a roadmap that tells you what to do to respond to an event that impacts your business. But, it’s not enough to just have a plan, you must also be able to quickly execute it to have a resilient supply chain.
What then should supply chain leaders do to ensure they are prepared? It starts with assuming the right mindset.
A risk management mindset is crucial
The most resilient supply chains – those that are effective even when faced with catastrophic events – are the result of a risk management mindset that emphasizes diversification. They are the work of organizations that did the groundwork of creating plans that can be implemented and acted on quickly. At their core they address two imperatives:
1. The need for alternative suppliers: Having alternative sourcing options in place is the hallmark of any supply chain resiliency plan. It can also be one of the most difficult things to achieve, particularly for organizations that rely on raw materials that are highly specialized or come from areas of the world prone to conflict or disruption.
Putting optional suppliers in place is not an easy task, and it also takes time to vet them. This is particularly true in highly regulated industries like medical devices, where it takes 10-18 months to vet a source and address compliance and quality requirements. The time to map these back-up plans is not when an incident occurs, but well in advance to ensure continuity if and when something happens.
2. The need for cross-functional collaboration: Organizations with effective supply chain resiliency plans know their decisions require the input, buy-in and support of colleagues in numerous internal business functions, among them product design, procurement, finance and marketing. For example, if a rare resin for extrusion molding is only available from a single source it is worth exploring if a more commonly available item can be used instead. Such questions should be explored with the design and quality teams.
Cross-functional collaboration is also particularly important if new suppliers need to be onboarded, for example when the risks associated with any component shortage are material to the company’s operation and performance. Onboarding requires not only the collaboration of procurement to vet suppliers’ financial strength, quality and business practices, but also finance.
Other departments may also need to be included to answer questions such as whether the risks involved justify the storage of additional supplies and the capital expenditures required to attain them, and whether carrier partners can effectively add them to the company’s supply chain network.
Once onboarded, the second most important step in the creation of any supply chain resiliency plan begins. Vigilance is required.
Resilience requires constant monitoring
Importantly, supply chain visibility and supply chain monitoring are different things. Supply chain visibility comes down to knowing where supplies come from – including where your suppliers get their materials – how and how often they are delivered, and when any interruptions occur. But supply chain visibility alone is not a sufficient safeguard.
In-depth monitoring, not just of the supply chain, but also the myriad issues and events that can impact it, is crucial. Monitoring efforts should be multi-faceted and address several key factors:
1. Track the right performance indicators (KPIs): Leaders should ask if they are measuring the right things to determine if their supply chain is functioning optimally and protected from risks – something that differs from product to product. Internal metrics like overall equipment effectiveness (OEE), throughput levels, maintenance costs and performance benchmarks – including if constant improvement is achieved – must be tracked.
2. Monitor suppliers with supplier scorecards and conduct routine reviews: Metrics like the percentage of on-time, and in full (OTIF) deliveries and quality levels should be analyzed as a matter of course. Leaders should also conduct annual or quarterly business reviews with the supplier to maintain a dialogue and gain insight into the suppliers’ financial health and other factors. These reviews should also be used to strengthen relationships with suppliers. When difficult situations call for supplier diversification, suppliers naturally take care of the customers they know first.
3. Monitor global events: No one predicted the floods in Taiwan that devastated the hard drive industry in 2011, the collapse of the Francis Scott Key Bridge this year, or the impact of the Uyghur Forced Labor Prevention Act. In all cases supply chain leaders who can act quickly gain an immediate and important advantage. Fast action requires continual monitoring of world events and the risks they pose.
Perhaps most importantly, supply leaders must remember that business continuity and resilient supply chains require not only hard work, but continual work. What it means to be prepared, like the events that test it, changes every day. Now is the time to reassess the supply chain resiliency plan that served you well and take action to ensure your organization is prepared in the event of disruption.
Author Bio
Matt Stekier, Principal, Supply Chain, at Plante Moran serves clients by quickly identifying improvement opportunities that deliver tangible results and lower costs in a variety of industries, including the medical device, food and beverage, footwear and apparel, military vehicle, and automotive manufacturing sectors. Matt earned his bachelor’s in supply chain management from Central Michigan University and a master’s in business administration from Wayne State University. A 10-year veteran of Plante Moran, he previously served in supply chain roles at Mercedes-Benz Technology and Ford Motor Company.
Aaron Ennest, Senior Consulting Manager, Supply Chain, at Plante Moran helps clients identify, prepare for and respond to market disruptions and events impacting their supply chains and business models. Prior to joining Plante Moran, Aaron was a project team leader at a global Tier 1 automotive supplier, where he oversaw holistic efforts to decrease costs and increase product quality from engineering and design to manufacturing and supply chain operations. A staff member of Plante Moran for nearly ten years, he earned his bachelor’s in supply chain management from Michigan State University.
