5 Factors for Resilience in the Supply Chain

December 26, 2021
Posted in Blogs
December 26, 2021 Chin Lu

How companies can make their supply chains resilient.

Disruptions in global value chains are occurring with increasing frequency and speed.

To avoid costly outages, companies should strengthen their resilience.

Five factors are essential for building resilient supply networks.

Being able to withstand stress and respond to crises with confidence: These traits are known as resilience in psychology. Globally active companies should take this concept as an example when designing their supply chains.

Climate change, resource scarcity, and demographic change: these and many other developments fundamentally change markets, companies, and supply chains. At the same time, international economic markets are becoming more intertwined and more volatile. As a result, external influences are causing supply chain disruptions with increasing frequency and speed. The Corona crisis has shown the damage that can result.

Many companies prepare for such events with statistical forecasts or experience-based risk management. But these methods are often unreliable. Traditional supply chain management often focus on cost and eco-efficiency – no fallback options or alternative resources are provided for failures.

To avoid costly disruptions and maintain their market position, companies should remain resilient in their supply and production network. The following five factors are critical to building a resilient value chain:

Factor 1: Make organizations more agile.

Agility describes the ability to actively and flexibly adapt to changing circumstances. Early warning systems and alternative plans are elementary factors that can prevent delivery failures due to insufficient inventory or technical production problems.

Dual- or multi-source strategies in purchasing are also of particular relevance, whereby alternative suppliers should be regularly identified and qualified. It is essential to know what customers want, to implement changes in demand as quickly as possible.

Factor 2: Decentralize supply chains

It is advisable to decouple individual company locations from central management processes. At the same time, a continuous flow of information all the way to the initial supplier should be ensured. This enables major fluctuations in order volumes to be identified early.

The individual sites should be able to respond as quickly as possible to changes in demand. Furthermore, a global supplier structure helps to ensure product supply in drastic events.

Factor 3: Use redundancies

If structures, information, or elements are used multiple times, and in different places, this redundancy leads to uniform and thus interchangeable processes. Examples of this can be global standards for layouts, infrastructure, technology, or production lines.

In this way, companies can easily switch to other production sites in a malfunction and keep production going. Minimizing product variants and holding safety stock in a targeted manner can also be useful to increase redundancy in the supply chain. Alternative distribution channels allow companies to respond quickly in the event of disruptions.

Factor 4: New work – shaping the working environment

Even at the recruiting stage, emphasis should be placed on the qualifications and motivation of potential new employees and personality traits. Interdisciplinary and intercultural teams combine different competencies and perspectives, favoring innovative approaches. Group work is a suitable means of achieving top performance as a team.

Factor 5: Permanently stimulate learning processes

Nothing is more constant than change. Companies should learn to adapt to constantly changing circumstances and integrate them into their systems as opportunities. This means, for example, making optimum use of production capacities and systematically preparing for supply chain interruptions with the help of scenarios.

As part of “business continuity management,” emergency processes are drawn up for crises to avoid negative effects on the market and customers. In addition, continuous employee training is essential to build up expertise and generate a competitive advantage.

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