#5: On Supply Chain Disruptions and How to Prepare for Them

In an interconnected global economy, supply chains serve as the backbone of businesses, enabling the smooth flow of goods and services from manufacturers to end-users. However, the vulnerability of supply chains to various disruptions, while always present, have become more evident in recent years. Be it natural disasters, geopolitical tensions, or global pandemics, the risks are invariably diverse and unpredictable. In this [T] Nugget article, we explore various types of disruptions to the supply chain and highlight some of the best strategies to help enterprises build much-needed resistance.

Types of Supply Chain Disruptions

Here are some of the most common causes of disruptions in a modern Supply Chain network:

Natural Disasters:

Earthquakes, floods, wildfires, and other forms of natural disasters can wreak havoc on supply chains. This is not only due to their immense power, reach and size of impact.

The element of randomness associated with natural disaster is, arguably, what makes them so difficult to deal with. Even at minimum level of impact, natural disasters have the capability to disrupt transportation networks, damage facilities, and impact of flow critical raw materials.

Geopolitical Tensions:

Various type of conflicts, such as trade wars, and military confrontations do impact global supply chain networks with long-term and far-reaching consequences.

Trade restrictions, introduction of tariffs, and other changes to economic policies typically lead to disruptions in supply chain networks that translate into cost increase or goods shortages.

Pandemics and Health Crises:

What can be said about the impact of pandemics that has not been said already, as a direct result of our recent exposure to COVID-19?

Sudden increase or decrease in demand for some products, severe disruptions to the transportation network and intense impact on labor productivity are some of the most notable consequences of this type of Supply Chain challenge.

Technological Disruptions:

While technology, in its own right, is mostly a force for good, realizing its true potential within Supply Chain is a minefield to be navigated with extreme care and clear planning.

The technological challenges for supply chain can be group into 2 separate categories:

1. Cybersecurity Challenges: Or when bad actors meet good and powerful technologies. Such empowered bad actors are capable of identifying the most vulnerable parts of Supply Chain networks and create hard-to-find problems that may be notoriously expensive to fix.

2. Implementation Challenges: As promising as some of the latest technology advancements, such as Generative AI have been, one still cannot build a house on shaky foundations! In other words, in a world when many enterprises within the Supply Chain sector still rely on core technology solutions from the 90s (say, Excel) that are simply not suitable for the Big Data challenges of today, it is difficult to utilize cutting edge technology beyond a few controlled Proof of Concept (POC) projects.

Supplier Issues:

Another age-old problem of Supply Chain concerns dealing with the unpredictability of suppliers’ overall health. This includes general product quality issues, impact of regulations or financial hardships which can impact the entire chain. And the fast pace of change in the world’s economic and technology landscape means that suppliers are under increasing pressure to adapt to change more quickly, which is likely to result in failure and subsequent disruptions.

In sort, now, more than ever before, enterprises cannot and should not rely on single suppliers for their most critical requirements.

Strategies for Supply Chain Resilience

While easier said (to suggest) than done (to implement), here are some of the most appropriate ideas for addressing the aforementioned issues:

Diversify Suppliers:

Probably a no brainer: One does not need to operate in the modern world of Big Data to appreciate that having multiple options can pay off well!

Of course, this does require additional effort and investment to quality multiple vendors (a process challenge) and verify and maintain a mapping of similar products to switch between (a technology challenge) but the initial effort and investment in this regard typically proves a great insurance policy for any enterprise.

Supply Chain Mapping:

Any network is only as strong as its weakest point. Therefore, identifying the most vulnerable parts of a network is, arguably, the most critical activity for Supply Chain practitioners today.

This allows enterprises to understand various types of dependencies that collectively drive overall performance of their respective networks and helps prepare with much-needed mitigation plans to address each potential bottleneck. It is also important to note that solid use of technology in simulating various “corner cases”, such as unusual demand spikes or unplanned disruptions to network infrastructure, can be instrumental in preparing for every eventuality in good time.

Inventory Optimization:

While it is readily understandable why excess inventory is not a good idea (it is not cost-effective), most of us needed the harsh experience of COVID pandemic to appreciate why Just-In-Time (JIT) may not always be the best approach to inventory management!

In the end, it is finding the balance that is at the heart of a solid inventory management strategy and to achieve that, latest technological advancements, such as effective utilization of Optimization techniques, are keys to success.

Technology Integration:

Embracing technology, such as advanced analytics, artificial intelligence, and blockchain, can enhance supply chain visibility and responsiveness. These tools enable real-time monitoring, forecasting, and risk analysis.

The fast pace of change in the world of Supply Chain means that dynamic monitoring of performance, effective forecasting and continuous risk analysis and mitigations are crucial elements of a successful Supply Chain strategy.

While utilization of the latest technologies, such as Artificial Intelligence, and effectively integrating these into the operational technology stack of an enterprise are essential for implementing a successful strategy, revamping the foundation of technology within the said enterprise is of paramount importance. In short, never underestimate the power of starting your next venture on solid grounds!

Collaborative Relationships:

The increased interconnectivity of activities of various players within a typical Supply Chain network means that you can never truly avoid the impact of problems brewing in other parts of the network. So, you have a simple choice as follows:

• 1. Wait until a problem occurs and do your best to react to it or,

• 2. Work closely (let’s call it collaboration) with other players within the ecosystem to identify potential weak points within the network and anticipate together how to avoid issue in the first place or, in case a problem occurs, how best to coordinate efforts. The key to following this strategy is, of course, Strategic Data Collaboration between all participants of a Supply Chain ecosystem.

 We anticipate that in the coming years real-time data collaboration, between enterprises and their respective suppliers, partners, and clients will form an important part of Supply Chain operational activities.

Scenario Planning:

This is yet another area where technology can be a great enabler. As hinted earlier, the best way to deal with a problem is to ensure we know all about it beforehand and to that end, the ability to play out and analyze various scenarios, regardless of how common they may be, is crucial.

Such scenario analysis exercises allow for early identification of bottlenecks and activities needed to prepare for the unexpected outcomes.

Resilient Infrastructure:

Investing in resilient infrastructure, both physical and digital, can minimize the impact of disruptions. This includes redundant facilities, backup systems, and robust cybersecurity measures.

Let’s face it: Problems happen and sometimes, they are not quite within your sphere of control. What is, however, possible to influence, is how you plan for such scenarios (see the previous point) and how you can fall back on an alternative path, within the Supply Chain network, that minimizes the negative impact of a problematic scenario.

Investing in and building alternative physical and digital infrastructures are key to success here. Again, think of this not as an excess cost but as a well-designed insurance policy that, when the dust of network disturbance is settled, may be the difference between disappearing altogether or rising as stronger player within the ecosystem!

Conclusion

In todays’ fast paced world of economy, one cannot avoid Supply Chain disruptions. Against this backdrop, an enterprise’s longevity depends on a number of factors such as, effective use of technology to play out various scenarios to analyze and plan for, collaboration with other participants within the ecosystem to share useful data and insights, removing single-supplier dependencies, investing in alternative infrastructure elements to build resilience and ensure technology foundations are up-to-date and capable of supporting intense and dynamic flow of data in operational mode.

Finally, this is a never-ending story so, be prepared for a culture of continuous learning and improvement!

At Tetrixx, we are obsessed with effective utilization of modern technologies to transform and improve how our clients do business. We would love to hear your take on this topic and, of course, would be happy to discuss with you many ways in which we can help you become a more competitive Supply Chain player in your specific domain. Find us at www.tetrixx.io for more details.