Five ways to better manage supply chain disruption

1. Don’t focus on cost alone

The count­less stock delays and short­ages over the past 18 months caused by a lack of pre­pared­ness and agili­ty for the coro­n­avirus-induced dis­rup­tion have, for the first time in decades, called into ques­tion the run­ning of lean sup­ply chains designed to boost effi­cien­cies and prof­its. They have laid bare a frag­ile and com­plex sys­tem that “has ulti­mate­ly mor­phed into an invest­ment plan focused on quick fix­es and last-minute saves”, accord­ing to Patrick Van Hull, indus­try thought leader at Kinax­is, a glob­al sup­ply chain man­age­ment com­pa­ny. 

Mal­colm Har­ri­son, group chief exec­u­tive of the Char­tered Insti­tute of Pro­cure­ment and Sup­ply, agrees that many had seem­ing­ly dialled-up risk in the hunt for greater finan­cial rewards. “Ensur­ing resilience and achiev­ing val­ue have always been the over­ar­ch­ing objec­tives for pro­cure­ment and sup­ply pro­fes­sion­als,” he says. “Focus­ing on cost alone is a risky strat­e­gy for any organ­i­sa­tion. We’ve had decades of strong, lean and some­times sin­gle-sourced sup­ply chains work­ing so effi­cient­ly that we hard­ly noticed them.”

The pan­dem­ic, he says, has encour­aged sup­ply chain man­agers to renew their focus on mul­ti-sup­ply strate­gies, local sourc­ing and best val­ue in the sup­ply chain, includ­ing work­ing with com­peti­tors.

2. Invest in technology

Dirk Hol­bach, chief sup­ply chain offi­cer of laun­dry and home care at Henkel, says it was a tremen­dous advan­tage that his organ­i­sa­tion was already far along its dig­i­tal trans­for­ma­tion jour­ney before the pan­dem­ic. “The real-time vis­i­bil­i­ty along our sup­ply chain, which is a result of deploy­ing Indus­try 4.0 tech­nolo­gies, allowed us to focus on the right chal­lenges and to make the best deci­sions,” he says.

Van Hull points out that com­pa­nies invest­ed in dig­i­tal trans­for­ma­tion pre-pan­dem­ic were finan­cial­ly out­per­form­ing indus­try aver­ages and surged fur­ther ahead of rivals over the past 18 months. “These types of results present a sig­nif­i­cant oppor­tu­ni­ty for sup­ply chains, which his­tor­i­cal­ly have strug­gled with trans­lat­ing oper­a­tional capa­bil­i­ties and dig­i­tal trans­for­ma­tion into finan­cial suc­cess,” he says. 

3. Develop supplier relationships

While invest­ment in tech­nol­o­gy is vital to increase sup­ply chain resilience, old-fash­ioned human-to-human talk­ing to solve prob­lems is just as impor­tant when dis­rup­tion inevitably strikes. Devel­op­ing and nur­tur­ing sup­pli­er rela­tion­ships accu­mu­lates mutu­al trust that can be cashed in when required, whether that buys favourable prices, short­er lead times or extra stock.

And, as the idiom sug­gests, a prob­lem shared is a prob­lem halved. “Embrace col­lab­o­ra­tive sup­ply chain risk man­age­ment,” urges Dr Alireza Shokri, asso­ciate pro­fes­sor in oper­a­tions and sup­ply chain man­age­ment at Northum­bria Uni­ver­si­ty. “Invest time in a col­lab­o­ra­tive cul­ture, build trust and use these rela­tion­ships to strength­en pre­ven­tion and mit­i­ga­tion strate­gies.”

Shel­ley Har­ris, com­mer­cial direc­tor of IPP, which pools and pro­vides pal­lets and box­es across Europe, agrees. “Our part­ner rela­tion­ships are key, help­ing us to face new chal­lenges as well as to work as effi­cient­ly and pro­duc­tive­ly as pos­si­ble,” she says.

The strength of its sup­pli­er rela­tion­ships has allowed IPP to con­tin­ue to ful­fil its cus­tomer deliv­er­ies, despite the chal­lenges the wider indus­try is fac­ing, notably dri­ver short­ages. “We’re stronger because of long-stand­ing rela­tion­ships – we’ve seen a min­i­mal impact on our oper­a­tion and result­ing ser­vice to our cus­tomers,” she says.

4. Improve transparency

The num­ber-one way to man­age dis­rup­tion, accord­ing to Har­ri­son, is a deep under­stand­ing of your sup­ply chain and a focus on trans­paren­cy. While this requires the right tech­nol­o­gy, as busi­ness­es have had to oper­ate more effi­cient­ly in the dig­i­tal space with more automa­tion, it starts with under­stand­ing the dif­fer­ent tiers of the sup­ply chain. 

“Trans­paren­cy across all tiers of the sup­ply chain is a chal­lenge,” he acknowl­edges, “but that vis­i­bil­i­ty con­tributes to val­ue in that it [helps to] remove fraud and cor­rupt prac­tices and [helps busi­ness­es] look for signs of mod­ern slav­ery among their sup­pli­ers.” 

Har­ri­son stress­es it is impor­tant to under­stand the robust­ness of dif­fer­ent sup­pli­ers – and their sup­pli­ers. Trans­paren­cy allows a busi­ness to iden­ti­fy poten­tial prob­lems, for exam­ple if a com­po­nent is sourced from a sin­gle coun­try or loca­tion and to track ship­ments.

This chimes with Van Hull’s thoughts. “Increased trans­paren­cy is high­ly desir­able for sup­ply chains to sense dis­rup­tions as they are hap­pen­ing and respond imme­di­ate­ly,” he says. “That is even more use­ful when it can be tied to finan­cial out­comes, such as reduced inven­to­ry and cash buffers, improved capac­i­ty util­i­sa­tion and low­er cost res­o­lu­tion of demand-sup­ply mis­match­es.”

5. Get the training right

Hol­bach believes train­ing is imper­a­tive to max­imise the poten­tial of tech­nol­o­gy solu­tions. Empow­er­ing local teams and using their expert knowl­edge will strength­en the sup­ply chain. They will flag poten­tial issues ear­ly, giv­ing the net­work a bet­ter idea of where to go for help with rout­ing or stock if required. 

“We’ve had to react with agili­ty dur­ing the pan­dem­ic and that was only pos­si­ble by trust­ing our teams world­wide,” says Hol­bach. “It cre­at­ed the free­dom to act fast, find the best solu­tions and keep our cus­tomers and con­sumers sup­plied with essen­tial prod­ucts.”

He believes a pro­gres­sive approach to train­ing starts from the top of an organ­i­sa­tion. “As lead­ers, you should nev­er stop learn­ing,” he says. “To pre­pare for the unknown, you have to have the right mind­set when con­front­ed with new and dif­fi­cult sit­u­a­tions.”

Har­ri­son echoes this insight, say­ing that sup­ply chain pro­fes­sion­als need to be equipped with the right skills and com­mer­cial judge­ment, which can only be achieved through train­ing and devel­op­ment. This means being up to date, qual­i­fied, informed and skilled.

“What this pan­dem­ic has shown is that you need to invest in both tech­nol­o­gy and peo­ple to ensure sup­ply chains are resilient, then we will man­age bet­ter through the next glob­al shock,” he says.