For today's companies, supply chain resilience is mission-critical. Global interdependence is only increasing, and businesses have to keep their logistics performance strong to maintain continuity and drive overall success.
In the face of the COVID-19 pandemic and geopolitical conflict flaring around the globe, organizations are realizing the vulnerabilities in the global supply chain. Massive fluctuations in the Federal Reserve's Global Supply Chain Pressure Index (GSPI) began in 2020 and are still ongoing. In an era where the next unforeseen disruption may be right around the corner, resilience has never been more essential.
Supply chain resilience comes down to a few simple concepts, defined variously in research journals and industry publications, which can be summed up as "3 Rs."
On top of these principles, supply chain resilience relies on reducing complexity and uncertainty wherever possible. Companies that can run such streamlined, high-visibility supply chains will be better prepared to guard against disruption.
One early step in a company's journey to supply chain resilience involves understanding current chokepoints and vulnerabilities.
Today's global supply chains are precision-tuned to deliver reliable operations at the lowest possible cost. These interconnected, lean supply chains are vulnerable to outside forces, including trade wars, new tariff levels and shipping incidents.
The main sources of supply chain uncertainty boil down to three categories: suppliers, production and customers. Most of the danger produced by these groups manifests across four areas:
Organizations need real-time visibility across all their processes at all stages of the supply chain. This enhanced level of insight will allow them to detect and correct disruptions wherever they arise.
While major global disruptions and "100-year events" may seem too rare to plan around, recent history has shown that there is value in being proactively prepared to handle worst-case supply chain scenarios.
A disaster anywhere in today's interconnected supply chain can have a wide-ranging impact, and these large-scale events are worth planning around. In just the past few years, those events have exposed supply chain vulnerabilities, with losses reaching elevated levels. Every day that the container ship Ever Given blocked the Suez Canal in 2021, $9.6 billion in global shipping value was wiped out.
Executives have to deal with the tough task of quickly handling crises while also trying to make their supply chains stronger for the future. Transparency can be hard to attain and supply base diversification, while critical, is resource-intensive. These problems make strengthening supply chains a slow and difficult process, but the process is something leaders should consider. For supply chain companies, the opportunity to gain a competitive edge has recently expanded with the ability to leverage innovative technologies.
Digitization is a key to empowering supply chain leaders to find better solutions to their problems. Resilience plans and decision-making in today's logistics operations should leverage the vast amounts of fast and reliable data.
Digital transformation is a vital component in building durability and reducing complexity, and can specifically address a variety of issues:
Digitization has delivered new ways to track supply chain status with high precision and real-time speed. This allows companies to detect potential disruptions early, allowing them to plan ahead and withstand the negative effects.
When market demand drops, increases or shifts rapidly, what can companies do? Companies faced this question directly during the early days of the COVID-19 pandemic as governments urged businesses to retool their production capabilities to fill the need for critical items, including personal protective equipment (PPE).
In today's digital business climate, it's possible to build highly flexible supply chains that can change based on rapid demand changes. The mentioned modeling tools help businesses map out their next steps, while digital twins and cloud computing enable high-level planning and scaling up or down as demand dictates. Furthermore, with 3D printing, companies can change their production strategies without expensive, time-consuming retooling.
The path to improved supply chain resilience often involves passing through several challenges or issues to deliver value. These include:
Organizations that plan for these issues in their supply chain digitization plans will be better equipped than their competitors to stay effective in an era of high-level risk and global interconnectedness.
Digital transformation as a concept goes beyond the supply chain — businesses should be thinking about all their operations in these terms. Applying these principles to logistics is a way to lay strong groundwork for flexible, high-visibility supply chain operations that can respond effectively to crises.
The road map to transformation consists of a few distinct steps:
Read our eBook on business transformation to see the process of successful transformation laid out in detail.
There's a need today for flexible, adaptable supply chain resilience strategies that will deal with both current and future issues. One of the key themes of today's industry is that global-scale disruptions can strike at any time. Readiness for the unexpected should be built into businesses' digitization and modernization plans.
For an example of a recent, successful supply chain transformation, you can observe what Transcenda accomplished for BNSF Logistics. The organization wanted help following its digital-first product roadmap without compromising the quality or security of its systems. As part of this effort, BNSF and Transcenda built out new customer-focused booking capabilities for non-standard loads.
Organizations around the world are focused on digitizing their supply chains and pursuing a more resilient, flexible future. To learn what that could mean for your business, contact us.