Four steps to build a more transparent and resilient supply chain through risk management
Today’s supply chains are high-performing, globalized machines. With leaner supply chain management techniques and approaches like outsourcing, offshoring, just-in-time inventory and vendor managed inventory, disruption has worldwide consequences. Optimizing inventory based on internal systems and operations isn’t as effective as external disruptions continue to test supply chains.
As a result of COVID-19, gaps in supply chains became more evident. Less resilient organizations experienced inventory shortages, unexpected demand shifts, decreased productivity, shipment delays and, in some cases, a tarnished brand reputation. Unable to keep their promises to customers, employees and partners, these organizations demonstrated that supply chains are only as strong as the weakest link.
Teams with mature supply chain risk management strategies adapted to disruption and continued to delight customers. By building visibility into their supply chains, these organizations could see suppliers’ changes in real time and respond with faster time-to-market.
There are many different tools available to help build a smarter and more resilient supply chain experience. But without a deep understanding of your existing supply chain and goals, you may not be able to get everything you need out of a tool. Here are four ways to build a cohesive risk management strategy that you can use to proactively prevent and mitigate risks across the supply chain.
Monitor your supply chain and actively plan for future disruption
No supply chain is without risk. So, before you can even craft a strategy, you’ll need to identify the risks within your supply chain. From suppliers and production flows to transactions and operations, look at the details of each interconnected relationship and segment of your supply chain to learn where your vulnerabilities and bottlenecks lie. Think of this fact-finding mission like building a customer relationship management (CRM) tool but for suppliers instead of customers.
Once you have this information, you can drive immediate supply chain actions and begin to craft your supply chain risk strategy. There’s only so much capacity in the market, but you can improve your competitive position by simply identifying the risks and leveraging those insights to consistently deliver on your promises to customers.
Quantify risk and compare results over time to ensure business outcomes
To better understand your exposure and how much certain disruptions—like a fire at a specific plant—would impact overall production, identify measurements to gauge and quantify risks related to revenue, customer experience and ecological footprint across your supply chain. When using a data management solution to categorize certain aspects of your supply chain as high, medium or low risk, the resulting transparency shows your teams how reliable the supply chain is. You can also extend a measurement system outside your organization as a way to benchmark yourself to other industry leaders.
Whether you gather your data annually or monthly, internally or externally, a regular measurement and analysis cadence helps ensure quality findings. This data set is pivotal to shaping a risk management strategy and prioritizing your resources’ time for the greatest return. By combining these findings with the right analytics tools, you can enhance the reliability, quality and repeatability of your processes, in addition to customer experience.
Build visibility and data integration across your multitier supply chains
All the information you’ve gathered by monitoring and measuring risk enables your teams to identify relationships and the resulting dependencies within your end-to-end supply chain with newfound transparency. Establishing a trusted data exchange with blockchain enables you to gather internal and external data from different sources. You can then synthesize that data into valuable insights and share them across your network. Once these insights are gleaned, critical transactions, as well as external and internal events, are identified and communicated with stakeholders about shared risks along the way.
This level of visibility has two benefits. First, the next time you have a supplier effected by a strike, inclement weather and other typical disruptions you’ll be better prepared. Second, this information can help achieve your sustainability goals, surfacing commodities sourced from conflict zones or areas with unsustainable farming practices. Based on information from all suppliers, you can build a model to help proactively manage your supply chain—testing different scenarios to see which plans of action best align with your shared goals.
Improve resiliency and reliability of supply chains
Now you can put preventative and proactive strategies in place and continuously iterate to improve the reliability of your supply chain, introducing new technologies like AI along the way to amplify results. With such a robust data set, you’ll be able to monitor your supply chain as you implement new strategies and evaluate the results of your changes. You’ll also be able to use AI to identify suppliers that have room for improvement, prioritizing based on highest impact and predicting new scenarios through simulations.
Such a deep understanding of your supply chain’s strengths and weaknesses enables business continuity planning and rapid response strategies. You’ll also be able to crowdsource feedback from suppliers and external customers on what changes impact them the most. Perhaps that niche supplier with a product that has 12-month lead time isn’t as valuable to your customers as you thought. Based on your findings, you can continue to optimize for both lower costs and higher customer satisfaction.
With visibility across your supply chain comes control and peace of mind
Consumers want trust and transparency when they purchase something from a vendor, and navigating these expectations isn’t easy. COVID-19 highlighted this issue of supply chain vulnerability for leaders. To emerge stronger from the pandemic and deliver on customer expectations, organizations need to demonstrate resiliency.
Resiliency requires transparency across your supply chain. With a better understanding of the relationships between suppliers, it’s easier to plan for future disruptions, incorporate risk management into operations strategies, make processes more sustainable and ultimately support your organization’s goals.
Using technology, supply chain leaders can design more reliable supply chains that bring greater visibility, agility and accuracy to their organizations. By using data management technologies—like AI, advanced analytics and scenario modeling—and continuously acting on derived insights to monitor your supply chain, measure risks, build visibility and improve resiliency, you can craft a risk management strategy that drives value.
Working with a supply chain consulting service can help you develop a robust roadmap with a comprehensive risk management strategy. At IBM, we rely on deep experience with technology and our own supply chain to help create a truly comprehensive approach to risk management where technology helps strengthen the resiliency of your supply chain.