What is supply chain resiliency?
How to balance efficiency with resiliency
For years, supply chain professionals have measured success by how well they have been able to drive down costs and drive up efficiency. Just-in-time (JIT) became an artform and masters of the practice achieved new levels of precision. Goods arrived exactly when needed, waste and holding costs were kept to a minimum, and single source strategies prevailed due to ease and cost savings.
Then, 2020 sent shockwaves through many JIT strategies; the disruption was just too big to absorb and supply chain ecosystems had not been built to flex. As we come to terms with the fact that uncertainty is here to stay, there has been an awakening in the discipline of supply chain with respect to resiliency. The time has come to change the maniacal focus on efficiency for one that balances both efficiency and resilience. Supply chain pundits from industry and academia point out that it is possible for businesses to strike a balance between just in time and just in case. Wendy Tate, professor of supply chain management at the University of Tennessee, and coeditor-in-chief of the Journal of Purchasing and Supply Chain Management said it well, “Eliminating waste is good, but inventory isn’t necessarily the same as waste. Take out too much inventory, and you add risk. In short, we need to rethink what JIT means and the trade-offs.” It’s now clear that resiliency must encompass being able to quickly adjust to – and even gain advantage from – disruptions, while preserving efficiencies as much as possible.
According to Geraint John, Vice President Analyst with the Gartner Supply Chain practice, “Supply chain executives overwhelmingly recognize the necessity to make their networks more resilient and agile.” Gartner defines supply chain resiliency as the ability to adapt to structural changes by modifying supply chain strategies, products and technologies, and agility as the ability to sense and respond to unanticipated changes in demand or supply quickly and reliably, without sacrificing cost or quality.
Supply chain leaders that IBM speaks with embrace this new focus on supply chain resiliency and are looking for an approach that minimizes the tradeoff between JIT and planning for uncertainty. In this blog, let’s explore best practices that drive supply chain resiliency with this definition at the core. This includes building resiliency in supply chain frameworks by expanding and enhancing partner ecosystems and relationships, while maintaining a focus on efficiency and meeting customer expectations. By understanding your options, making data-driven decisions, and maintaining communication with customers and other stakeholders, it is possible to strike the right balance for your business.
Why is supply chain resiliency important?
Supply chains are the backbone for the global economy. They have also grown increasingly complex and now are comprised of hundreds of suppliers, service providers and production and distribution centers spread across the globe. Since life as we know it depends on global supply chains being able to effectively source and collaborate across trading partners, business-to-business networks need to be built with resilience in mind. And even in the face of uncertainty, companies can deliver the right products at the right place and time, and even out-maneuver competitors.
While disruptions to supply chains vary in magnitude and impact, anyone who has worked in supply chain management for a while knows that disruptions are inevitable. However, one study shows that 60% of supply chain leaders say their supply chains have been designed for cost efficiency, not resiliency.
Supply chains have become so finely tuned to drive down waste and costs, that when supply chain leaders needed to make decisions quickly to address dramatic shifts in supply, demand and logistics, their options were limited. They lacked the data and strong partner ecosystem and relationships to find workable alternatives to keep their supply chains moving. In fact, a study by the World Economic Forum found only 12% of leading global companies sufficiently protected against future disruptions in supply chain and operations, with the remaining 88% urgently require additional measures to build resilience.
Modern supply chains must be equipped to quickly and efficiently adjust operations to manage through disruptions and even get ahead of them to minimize the impact of events before they occur. With access to real-time, trusted data and a strong ecosystem of partners, companies at the forefront of innovation are leveraging disruptions to improve business outcomes – not just revenue, but leaning into cost-optimization while exceeding customer expectations.
How to get started with supply chain resiliency
When business interruptions happen, supply chain professionals can face supply pressures, logistics limitations, dramatic demand mix changes, lack of visibility into inventory count, and location and capacity restraints. And this list is far from comprehensive.
That’s why businesses are prioritizing supply chain resiliency, with 87% of organizations surveyed telling Gartner they plan to invest in supply chain resiliency within the next two years. If your organization has similar plans, here are just five tips to help ensure you’re building your strategy on a solid foundation that allows you to minimize the tradeoff between efficiency and resiliency:
1. Keep customers front and center. One overarching lesson supply chain leaders have learned is that customers increasingly want full visibility of supply chains from inventory to last-mile logistics. Businesses need to provide that to meet customer expectations. According to a new survey of 2,200 adult consumers conducted by Morning Consult on behalf of IBM, two thirds said they expect to have delivery (67%) and inventory (65%) options immediately available when shopping online, while 64% will go somewhere else to purchase an item if it is not available for delivery within one or two weeks. B2B companies are also under unexpected pressure to deliver digital experiences on par with those in the consumer space. In fact, more than 70% of B2B buyers say they are moving to remote or digital purchases.
2. Digitize so you can automate. The ability to generate granular, real-time secure data about your supply chain has gone from nice-to-have to a necessity. But it’s hard to be agile if you’re relying on manual forms, fax and email for business transactions. Prioritizing digitization of essential manual processes is a critical first step to ensure visibility into accurate, real-time date as well as frictionless connectivity with suppliers. You’ll be able to detect issues before they impact your customers and your business while driving efficiencies.
3. Break down silos. For many organizations, data is scattered across siloed systems within and outside of organizational boundaries, so teams don’t have the information they need when and where they need it. End-to-end, real-time visibility into inventory and workflow activities across your organization enables you to optimize supply chain performance, deliver on customer expectations and gain competitive advantage. This includes visibility across multiple departments and divisions and across your extended supplier and partner ecosystem. You also need to be able to deal with massive amounts of internal and external data scattered across siloed systems, from disparate sources and in different formats. With the ability to integrate all relevant data sources and connect the dots, you can make more informed supply chain decisions and drive action.
4. Evaluate your sourcing strategy. Increasingly, companies are diversifying their sourcing strategies to identify multiple suppliers for goods and services, and further reducing their exposure by onboarding suppliers in different geographic locations. But perhaps even more important is the strength of your supplier relationships. Supply chain ecosystems based on truly collaborative partnerships foster greater creativity and flexibility in how you approach and mitigate disruptions. When your relationships with trading partners are built for the long-term on a foundation of trust, you can more effectively meet customer expectations while balancing costs and risks.
5. Commit to the long game. Supply chain resiliency isn’t a one-time project, but an ongoing process. A strategy for resiliency today, may not be a strategy for resiliency tomorrow. The sources, types and lengths of disruptions change. Your business is dynamic. And customer expectations continue to rise. The only constant is your requirement for options that allow you to create a safety net right now and shift it as your business and operating environment evolve. Resiliency is not a separate function, but must be built into the existing functional teams in your supply chain.
Supply chain resiliency best practices
Supply chain resiliency requires a multi-faceted approach that varies based on your organization, industry, customers and role within your business network. Here are just a few of the best practices that organizations are embracing to build a more resilient supply chain.
- Know your options. The strength of your partner ecosystem directly contributes to supply chain resiliency. When you’re locked into one supplier your options are limited, so you need to look for new ways to build and maintain trust and transparency with more partners. Technologies like blockchain can help simplify and accelerate supplier identification, onboarding and management, setting the tone for mutually beneficial relationships. Secure and scalable information exchange fuels transparency and trust, so you can gain a deeper understanding of options you can act on to deliver better customer and business outcomes.
- Make data-driven decisions. When you create a foundation of end-to-end visibility across the supply chain – into each source of supply and demand, including details on customers, orders, and inventory – you can identify potential pain points and develop contingency plans. Overlaying key technologies like AI, machine learning and analytics allows you to gain insights into the impact of external events that might cause disruptions. With a deep understanding of how your business runs on a daily basis, you can take advantage of a range of approaches to address multi-layered challenges. In fact, nearly half of all consumers surveyed by Morning Consult on behalf of IBM stated they are more likely to purchase from a business using advanced technologies such as AI to help reduce shipping delays. So, use AI and analytics to unlock opportunities and make better decisions.
- Manage expectations. You can’t avoid every disruption no matter how much you try. Part of supply chain resiliency means planning for contingencies and always being able to set and manage expectations. Once you make a decision and communicate to customers, keep those lines of communication open. With always up-to-date inventory and order information only a click away, you can still deliver value to customers even when further complications arise. Demonstrating resolve that you are taking the best course of action in the moment to optimize outcomes goes a long way toward protecting your brand.
Solutions for supply chain resiliency
Supply chain strains remain an ongoing concern for everyone. So, it’s never been more important to build supply chain resiliency. IBM understands what’s required to build resiliency in supply chain frameworks, ecosystems and relationships, while maintaining a focus on efficiency and meeting customer expectations.
Consider the following solutions to help you on your way:
IBM Supply Chain Intelligence Suite – An AI-based supply chain optimization and automation solution that helps accelerate time to value, increase supply chain agility, and improve supply chain resilience through actionable insights, smarter workflows and intelligence automation. Solutions like IBM Blockchain Transparent Supply allow you to build your own blockchain ecosystem to drive supply chain visibility, share data securely with trusted partners and increase efficiencies. Empowered by the industry-leading AI, IBM Supply Chain Control Tower provides the actionable visibility you need to orchestrate your end-to-end supply chain network, identify and understand the impact of external events to predict disruptions, and take actions based on recommendations to mitigate the upstream and downstream effects.
IBM Sterling Supply Chain Business Network – A trusted, scalable business-to-business network that helps automate and orchestrate your supply chain processes and partner collaboration on a single cloud-based platform. Support peak volumes of any transaction type with high availability and AI-powered data insights to help you detect anomalies and take corrective action to avoid disruptions. Unify supply chain data, insights and actions across your customers, partners and suppliers on a single business network.
IBM Sterling Order Management – Deliver optimal customer experiences with a complete omnichannel order fulfillment platform that empowers you to optimize for today and prepare for tomorrow. Accelerate transformation by simplifying technology and implementation complexity to deliver omnichannel order fulfillment capabilities such as curbside pickup, buy online pickup in store (BOPIS), and ship from store (SFS). Empower your business to maximize results by managing business rules that are right for your customers and your business.
Wherever you are on your journey to supply chain resiliency, we’re here to help you explore your options and take advantage of new ways to strike the balance between efficiency and resiliency.