Covid-19 lockdowns, an out-of-control recession, and the Russia-Ukraine conflict have all affected supply chains across the globe. It goes without saying that as the world prepares for recession 2023, CEOs must build supply chain resilience to ensure that products reach customers on time. Failure to tackle supply chain issues can disrupt product delivery, and the global economy at large. In the recent past, supply chain woes even pushed up oil prices.
According to the Boston Consulting Group (BCG), early investments in resilience will pay rich dividends down the line. BCG asserts that existing networks must be built to absorb shocks through network design and recover faster from unplanned interruptions.
To enable these capabilities, companies must have visibility across the supply chain and invest in the tools and assets required to maintain these systems.
In 2023, two of the biggest trends that will redefine supply chains are sustainability and resilience. Brands that focus on building resilience not just with direct suppliers, but also in second and third tiers will be able to reduce risk and manage crises.
What are the challenges that supply chains will face in the coming year?
Supply chains are coordinated networks that involve all businesses, facilities, and resources involved in the manufacturing of a product to its sale.
Macroeconomic issues
With high inflation and higher interest rates, suppliers are struggling to keep up with demand while keeping prices down.
Geopolitical instability
The Russia-Ukraine conflict has triggered an energy crisis and led to power tensions between the West and Moscow. This can escalate to increased tariffs, shortage of supply, and military control.
Operational Issues
Man-made and natural disasters are often unpredictable, and when they occur take out the supply chain. Pandemics, labor strikes, and cybercriminals also add to the woes of companies.
To reinforce supply chain resilience companies must factor these disruptions into their long-term plans, and build a system that can absorb and recover from such shocks.
How to develop supply chain resilience?
The BCG recommends building a holistic supply chain that will give companies greater visibility, ability to assess risks, and execute key solutions. To make this vision a reality, CEOs must set KPIs in place that can measure a company’s resilience capabilities.
Identifying risks must start at the part, supplier, location, and product level. This must then be measured and quantified in terms of exposure and damage, before developing capabilities to handle supply chain challenges.
The first step towards addressing supply chain issues is leveraging digital technology. Data-driven risk management is key to predicting supply chain challenges that can cripple product launches and deliveries.
Resilient companies focus on an integrated structure that builds on existing operations and processes.
Data Analytics
Before giving a prescription, you must first diagnose the issue. An ecosystem that relies on data to predict behavior while performing constant risk analysis gives you a competitive edge. It also helps point out inefficiencies in existing systems and plug loopholes.
Governance
Governance stands for integrating resilience measures into the system. By aligning metrics and incentives to address supply chain challenges on-the-go, companies can stay ahead of the game. Establishing cross-functional teams with direct access to executive management, also helps align the interests of all stakeholders.
Crisis management
Supply chain resilience must be built into the system, right from procurement. As anything from bad weather to labor strikes can wreak havoc to well-laid plans, risk management is vital to a company’s profitability. A firm must start out by boiling capabilities to tackle small crises, eventually setting systems in place to deal with long-term issues.
People
Resilience must be embedded in the ethos of the organization. Managing risk falls largely on the shoulders of everyday workers, who operate these systems. Supply chain challenges must be seen as something to be dealt with swiftly, and employees must be hired, trained, and retained for their resilient perspectives.
Sustainability and Change
As the world moves towards a net-zero future, supply chains stand at the forefront of a company’s sustainability goals. While change is constant, firms must align to science-based targets and work on building a sustainable network. Supply chains are key to overall environmental, social and governance (ESG) efforts, and must be agile and sustainable to stay resilient and relevant.
Companies must strategically invest in building supply chain resilience. Mitigating risk involves spending critical time assessing a problem and developing processes that can tackle them. The next step is to use the resources in your power to predict changes and prepare for worst-case scenarios.
