September 27, 2018
Every company is exposed to potential disruptions in its Supply Chain. What if a new pandemic breaks out? What if your main supplier fails? What if the price of a crucial raw material increases tenfold? If you only start thinking about this when it happens, it's too late. So, whether you like it or not, as management, you *must* address Supply Chain Resilience. But how do you do that concretely? In this blog, we show you the first steps you can take.
As businesses, we've had a few hectic years. Raw material shortages, trade wars, disrupted shipping routes; many companies were caught off guard and faced significant problems. During the pandemic, some businesses needed government assistance to avoid immediate bankruptcy. Due to these intense experiences, every management team now understands that the ‘good old days’ are over and that they had better prepare for a turbulent future.
But how do you prepare for something you don't know, and don't even know if it will ever happen?
Our first tip is to assign a Management Team member responsibility for Supply Chain Resilience. This person will ensure the topic is on the agenda throughout the entire company. For many businesses, this is certainly not a given. People generally don't enjoy working on Resilience and have all sorts of reasons: they find it vague, intangible, lacking urgency, time-consuming, not revenue-generating, and so on. What you need is ownership from an MT member, also because implementing Supply Chain Resilience requires cooperation from almost all departments.
To arm yourself against Supply Chain risks, as the responsible MT member, you'll need to take some minimal precautionary measures. One is to appoint a crisis team with the mandate to make necessary decisions during a crisis. If you still have to form your team while the house is on fire, you'll lose effectiveness. Another measure is to develop basic scenarios for the biggest risks your company faces. What if your largest supplier can only deliver half its usual volumes overnight? In a basic scenario, you would then define which alternative supplier(s) you would approach in such a case.
Besides creating a playbook on how to react to a disruption, you can also explore how to potentially prevent such a disruption. Perhaps you can reach better agreements with a supplier to reduce the likelihood of delivery problems. However, you need to know which supplier to engage with and if this truly represents your biggest risk. A resilience project involves costs, and people need to invest time, so you must come up with a thorough approach and set priorities. Our advice here is to use UC Group's Supply Chain Resilience Scan.
Companies that are more advanced often have teams dedicated to Supply Chain Resilience. These teams devise scenarios, advise on priorities, and implement the necessary measures to minimize the risk of – or consequences from – a specific disruption. These projects are discussed monthly by the MT, progress is monitored, and necessary decisions are made to enable the teams to proceed. The scan is performed at least once a year to verify if new risks have emerged and if priorities are still correctly set.
Due to climate change, scarcity, and geopolitical tensions, companies are facing significant events. Prepare for this by starting with a set of minimal measures. Assign an MT member responsibility, assess your vulnerability, and initiate a mitigation plan for your biggest risks. By conducting the resilience scan annually, you will identify new risks in a timely manner and set the right priorities in your improvement projects.
Start today and make Supply Chain Resilience an integral part of your business operations.
The above article was written by Johan Omvlee and Stef van Haaren of UC Group, both members of the Logistics & Supply Chain Resilience-tribe of the UC Group. The logistics experts at UC Group specialize in designing and optimizing Supply Chain concepts, particularly for medium to large-sized companies. The ability to navigate major societal changes and significant disruptions is gaining importance in this advisory role.
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