Avoid Supply Chain Disruptions With Strategies for Resilience
As far away as we are from “the pandemic era,” it would be nice if we could stop worrying about supply chain disruptions. What we’ve learned over the past few years is that the pandemic wasn’t the sole cause of these supply chain disruptions; it simply exacerbated existing problems.
Where we once hoped to return to “normal,” we now understand that what we’re experiencing now is normal. Ports are congested and infrastructure is aging. Trade wars and tariffs are looming threats, and actual wars continue to disrupt the food supply and oil production. Natural disasters, from hurricanes to wildfires to drought, are becoming more frequent and more intense. Labor shortages and labor unrest continue to present challenges to smooth supply chain operations. As recently as September of this year, The International Longshoremen’s Association—the union representing the workers who load and unload cargo at ports—conducted a two-day strike that, had it dragged on much longer, could have resulted in major supply chain disruptions.
The list goes on. When will it end? Perhaps the more important question is, how do we thrive in this sort of environment? Rather than waiting for things to return to normal, the only way forward is to develop a strategy of resilience.
Resilient Organizations Embrace Uncertainty
Chances are, moments of stability and control are going to be few and far between in the future. It’s not like the past was particularly stable, either. Back in the 1950s, historian Alfred Toynbee famously remarked that life was just one thing after another, and that “in almost every age…human beings have had to live their normal lives and do their normal business under conditions of uncertainty, danger and distress.”
It certainly seems that “one thing after another” is coming at us faster than ever. You’ll constantly face challenges from a number of fronts, whether competitive, economic, climatic, or technological. This is true of any business, but it is especially important for businesses in the middle of the supply chain to keep goods moving toward consumers. Without a strategy in place, you’ll constantly find yourself scrambling to react to challenges. The only way to mitigate the negative effects of these challenges is to be proactive rather than reactive. This means accepting that the only certainty is uncertainty and preparing strategically.
Building Supply Chain Resilience
Resilient organizations don’t just rely on one way of doing things. They put redundant systems in place so that if one fails, another can take its place. Sure, redundancies may add operational costs, but relying on one system and then seeing that system fail could be even more costly.
In terms of the manufacturing supply chain, building redundant systems means shortening the supply chain wherever possible and diversifying the suppliers and transportation services you work with.
Like developing redundant systems, shortening the supply chain may require an initial investment, but having relationships with local suppliers can be a lifesaver when port disruptions occur. Taiwan manufactures almost half of the world’s semiconductors, but the United States is on pace to triple its semiconductor manufacturing capacity within the next decade, according to the Semiconductor Industry Association. If no more semiconductors are coming in on ships from Taiwan, having a system in place to begin procuring from American manufacturers will be a lifesaver.
The answer to building supply chain resilience might not just be a question of offshoring or onshoring but an approach that combines multiple sources of materials. Any decisions regarding suppliers must not only take into account country of origin, but how those goods arrive in the US. Do their ships pass through the Suez Canal or Panama Canal? Do they arrive at ports on the west coast or the east coast? Earlier this year, severe drought in Central America disrupted operations of the Panama Canal, and Houthi rebels continue to attack ships in the Red Sea as they approach the Suez Canal. At the same time, labor disputes shut down ports on the east coast for two days. If you already have a strategy for dealing with disruptions, you won’t be taken by surprise and put into a reactive frame of mind by these events.
Resilience Must Be Maintained
Making your supply chain more resilient isn’t something that you can do once and call it a day. When you need to activate your backup systems, for instance, you need to have a process in place to make the change as smooth as possible, and the ability to review the effectiveness of that process. Keep track of events outside of your organization, as well, by following world events and staying in frequent communication with partner organizations so that you are always acting on the most up-to-date data.
It takes an empowered, engaged workforce to maintain this constant vigilance, which is why your supply chain strategy must be part of an overall culture of continuous improvement. Establishing and maintaining relationships with multiple businesses, enacting redundant systems, and getting your whole organization on board with a culture of improvement sounds like a monumental task, but it’s much easier when it’s rooted in a strong holistic strategy.
