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Increasing the Resilience of Supply Chains is a Business Necessity

The smooth the movement of raw materials and goods is paramount for the overall health of any economy. The strength of the supply chain determines how efficiently companies can source raw materials, parts and components they need to turn into finished goods and deliver to customers. This boosts corporate profitability, resulting in job creation and enhanced spending power.

The Threat of Natural Disasters

Natural disasters have a severe impact on supply chains and the impact on productivity lasts for years. In 2011, Japan suffered earthquakes and tsunami, which damaged airports and ports. This halted 20% of the global supply of semiconductor equipment and materials, while also disrupting production of auto parts, says an article published by The Balance.

The COVID-19 outbreak also caused massive supply chain disruptions. Long stretches of empty shelves in supermarkets became the new normal amid coronavirus fears. While many factories had to down their shutters for days, this wasn’t the main cause of the shortages. Instead, unfulfilled customer demand was the most visible sign of global supply chain disruptions.

The supply chain bottlenecks spared none. Even the world’s largest company by market capitalization, Apple, issued a press release to warn shareholders of a revenue target miss due to supply shortages of its bestseller iPhone product.

The OECD (Organization for Economic Co-operation and Development) lowered its global economic growth projection for 2020 to 2.4%, citing supply chain disruptions as among the leading factors.

Strengthening the Supply Chain

The coronavirus outbreak not just caused issues, but also highlighted some preexisting problems in supply chains. These problems were inherent; but had so far been dormant. There are a few things that companies can do to make their supply chains more resilient.

Lack of visibility: Almost 60% companies have poor visibility across their supply chain, says an article published by Jigsaw Business Group. Supply chain efficiency is dependent on a plethora of components, which need to work in harmony to move raw materials and goods and eventually reach end consumers. Companies need robust software solutions to gain visibility into this network of factors to make the best decisions.

The solution must combine automation and customization capabilities, have features like dynamic route optimization and assisted dispatch, while also making sensitive information like load and unload times, minimum mileage and time windows available at the fingertips, say experts at Key Software Systems.

Remain Abreast: Large companies need to continuously monitor developments and their possible impact on the supply chain. For instance, if a key supplier needs more liquidity during periods of uncertainty, companies can support them financially, rather than scrambling to identify new suppliers at short notice.

Increase Risk Tolerance: During periods of growth, companies need to continuously measure and monitor the health of their supply chain as well as adopt risk management strategies. The location of suppliers, evaluating and enlisting new suppliers, increasing inventories or investing in omnichannel distribution can help businesses increase their risk tolerance, according to a McKinsey report.

Finally, businesses need access to relevant data to increase the resilience of their supply chains. Demand signals play a key role. Businesses need to understand whether these signals are for immediate delivery or could last longer, in order to make supply forecasts and be prepared for the future.

Written By

Marcelo Fincher is a blogger & writer on technology related topics with years of experience in studying technological advancements. In his spare time, Marcelo likes to read books and take a walk on the beach.

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