Leona Harrison, Analyst, Specialty Fuel Services
As manufacturers are looking to source quality goods at the cheapest price, supply chains that were once found in a single country are now spread around the world. While managers have learned to address recurrent risks such as low impact incidents, supply delays, and demand fluctuations, they have not thought about designing supply chains that can mitigate or prevent the impact of risks such as political unrest, labor strikes and, natural disasters.
Some of these events can have severe repercussions on the operations hence companies should devise robust ways to alleviate them. While natural disasters cannot be avoided, putting plans and systems in place to minimise their effect, should your supply chain be affected, is necessary in order to ensure business continuity.
These 5 strategies can greatly help you in keeping the supply chain moving when disaster strikes.
- Exchange little performance for reduction of risk
The main reason why most companies are reluctant to deal with the risk is the belief that when they take the necessary steps they may suddenly lower their performance. One way of reducing performance while also lowering the supply chain risk is to overestimate the likelihood of disruption. Manufacturers would, therefore, be better off if they reduce the concentration of their resources. Managers must also carefully evaluate the cost of decreasing or increasing inventory, flexibility, responsiveness, and capability.
- Create supply chain agility
A business should build its risk mitigation strategy on the principle of supply and demand. One of the first industries that recognized this is the fashion industry. The fast fashion industry can, therefore, move items to the shelf within weeks in response to trends. This is very important when it comes to providing the business with a competitive advantage. It can also greatly reduce supply chain risk. This could mean anything from working with multiple suppliers to considering other deliver options, in order to spread the overall level of risk.
- Come up with a concrete plan when disaster strikes
A very good plan for handling supply chain issues must be designed to conform to the mitigation strategy. In order to lower the amount of time, companies should install IT devices that evaluate the flow of information and materials or a regular basis. Such systems will actually alert the organization if something unusual is about to occur.
- Have networks in place to sustain any potential disruptions
You need to model your supply chain in such a way that you can analyze the sources of the risks. Thankfully, there is enough technology that can allow you to know when to buy, store, and move the products. Such tools will also help you to evaluate different production, sourcing, and inventory strategies so as to keep pace with any changes that may occur. This can, therefore, make you employ assets effectively, reduce inventory, and boost your customer service.
- Develop a solid business process that takes care of risks
Any business should seriously consider the risks and assess the kind of impact that they may have. A strong operation and sales process can be the first step towards flushing out these issues. This strategic business planning process should now be more than demand and supply. It should focus on alternative demand-supply scenarios and their impact on margins and revenues.
By using these strategies keeping the supply chain moving when disaster strikes are very possible. When you recognize the true cost of disruptions and take the appropriate action, your business can be well prepared to weather any storm.
Pix credit: https://www.oxfamamerica.org/explore/stories/aid-travels-via-india-to-remote-villages-hit-by-nepal-earthquake/