Desperate times call for desperate measures. This saying is applicable even for supply chains. Before the pandemic, most people did not know how supply chains worked. But during the pandemic and even after it the perspective has changed. Due to global shortages and delays, businesses suffered across industries and the world.
Since then, the supply chain has become a front-and-centre issue at the highest levels of a business. This stopping of the normal functioning of a supply chain is referred to as supply chain disruption or logistics disruption.
This type of disruption is a major snag in the global chain of manufacturers, suppliers, shippers, carriers, wholesalers and retailers that keeps the goods and materials flowing in the supply chains. So, let’s see what it is in detail.
What is Supply Chain Disruption?
A logistics disruption is any event that disrupts the production, sale, or distribution of products. Logistic disruptions can include events such as natural disasters, regional conflicts, and pandemics.
For manufacturers, these problems result in shipping delays, slower delivery times, too much or too little inventory in warehouses or on store shelves, higher costs, and higher prices passed onto customers.
Some of these causes of logistic disruptions are predictable, for instance, during holidays when stocks of hot-selling items deplete. Other causes can include a global pandemic, a major weather event or information security breach or a sudden labour strike. In such cases, all parties in the supply chain need to be aware.
To raise this awareness, companies and all related parties can follow strategies for supply chain disruption to stay alerted. Let’s take a look at some of these strategies.
Managing Supply Chain Disruptions with 8 Strategies
To prepare and manage supply logistics disruptions, prudent manufacturers take measures that address both internal and external risks. They control what they can and mitigate the risks of factors and events that are out of their control. To do so, they adopt certain practices. We will see nine such best practices.
1. Create a Risk Management Plan
One popular planning model for reducing supply chain risks is PPRR: prevention, preparedness, response and recovery. Using this model, manufacturers can take measures to avoid supply chain risks they can control.
It also helps them to prepare a contingency plan to deal with disruptions they cannot control or hit suddenly. They respond by executing preset plans to reduce a disruption’s impact and then return their supply chains to their normal capacity as soon as possible.
A risk management plan for supply chains might focus more on external risks such as the potential for a geopolitical conflict, major weather event or labour shortage. But such plans should identify internal risks-for instance, procedural disruptions should manufacturing teams get restructured and recommend actions to eliminate or reduce those risks.
2. Diversify Suppliers
Relying on only one single supplier for certain components, raw materials or parts is like inviting the risk of supply chain disruption. This might prevent the supplier from meeting orders.
Diversifying suppliers will pay off in the long run but it is not always easy. For instance, when a manufacturer decides to use three suppliers instead of one runs the risk of damaging an important relationship. Perhaps the initial supplier will increase the prices to offset lower order volumes.
Let’s see another scenario- an Indian manufacturer might augment an overseas supplier with a domestic one. This practice helps to mitigate risks involving trade, shipping and more. However, this will add to the manufacturer’s costs. Sometimes a single supplier is the only option. They have the unique ability to provide something crucial.
Apart from diversifying suppliers, stopping supply chain disruption is also about communication. Let’s see how communication is a cornerstone in supply chain relationships.
3. Improve Supplier Communication and Relationships
This golden strategy can solve 90% of supply chain problems. With better communication between manufacturers and suppliers, they can reduce the number and frequency of disruptions. Manufacturers usually name a person or team to manage supplier relations. Depending on these circumstances, a quarterly, monthly or more frequent call is a chance to discuss problems and brainstorm solutions.
One way to improve relationships with suppliers- use automated systems. For instance, a system lets suppliers send automatic notifications when the orders get delayed giving manufacturing consumers more time to adjust their schedules.
It is crucial for manufacturers to clearly set their expectations of suppliers in their contracts and regularly review them. Many manufacturers invest in systems to improve how they track supplies and inventory so that discussions with trading partners depend on current, accurate data. Such measures will stop logistic disruptions.
Apart from this it is also crucial to use technology and automation to stop disruption of supply chains. Technology can streamline supply chain processes, reduce errors and miscommunication and more. Let’s find out how.
4. Use Technology and Automation
New technologies are making supply chains more resilient to disruption. For example: manufacturers set up 3D printing capabilities that are usually less costly than conventional manufacturing.
Another example of this is using new logistics applications that help manufacturers match freight loads to transportation capacity faster. This helps in ensuring more accuracy than manual labour.
Technology and automation enhance visibility, efficiency, and agility. AI and advanced analytics predict potential disruptions allowing proactive measures of automation to streamline processes, reducing reliance on manual intervention and minimising human errors.
Robotics in supply chains automate repetitive tasks, enhancing speed and precision manufacturing and logistics. The use of IoT sensors tracks inventory in real time, enabling proactive inventory management. Blockchain ensures transparency and traceability across the supply chain, reducing fraud and errors.
5. Increase Supply Chain Visibility
Lack of access to key information throughout the supply chain leaves manufacturers vulnerable to disruptions. Supply chain visits but allow them to track components, subassemblies and finished products as they move from suppliers and shippers.
Integrated systems improve visibility by collecting and sharing data across key points in the supply chain, making it easier to view procurement production, shipping and other activities,
For instance, with visibility into a supplier’s process, the manufacturer knows which orders are in production and which ones are in transit. This helps to manage expectations and avoid unpleasant surprises.
With a clear understanding of a supplier; ‘s sustainability practices, a manufacturer can determine whether using the supplier would pose a legal, financial or reputational risk. It is crucial to have visibility in the internal processes too.
6. Invest in Backup Inventory
Backup inventory, also known as buffer or safety stock, serves as a contingency reserve of products held by manufacturers and other supply chain participants to address supply delays or sudden spikes in demand.
Despite occupying warehouse space and incurring additional costs, it enables companies to fulfill demand without drastic price adjustments. Moreover, backup inventory plays a crucial role in averting shortages of essential items like food and medical supplies.
Manufacturers determine the required amount of backup inventory by considering factors such as lead times for product orders, inventory patterns, and annual demand fluctuations.
7. Use Predictive Supply Chain Analytics
Incorporating predictive supply chain analytics is essential for manufacturers to anticipate and mitigate potential disruptions. Through predictive data analytics software, simulations are conducted to forecast future scenarios, enabling adjustments to supply chain practices proactively. These analytics rely on comprehensive data collection, including historical demand, inventory trends, and external factors such as social media data on labour strikes or natural disasters.
8. Implement Agile Supply Chain Management
Adopting agile supply chain management practices is vital for ensuring the resilience of global supply chains. While long-range forecasting and planning are customary, manufacturers must remain adaptable to disruptions like supply constraints, quality issues, or equipment breakdowns.
Cloud-based applications facilitate real-time data collection and analysis, enabling rapid adjustment of plans and schedules. Empowering supply chain managers to make timely decisions is equally crucial; for instance, upon learning of an impending labour strike, a logistics manager can swiftly opt for an alternative supplier to prevent delays. Such process and personnel improvements are instrumental in enhancing supply chain resilience and responsiveness.
FAQs: Supply Chain Disruption: 8 Ways To Reduce It And Minimise Risk
What are the types of supply chain disruptions?
Some of the popular types are natural disasters, supplier issues, transportation delays, demand fluctuations, and geopolitical events.
What are some supply chain disruption examples?
Examples of supply chain disruptions include COVID-19 pandemic, port congestion, material shortages, factory fires, and cyberattacks on logistics systems.
What are risk reduction tactics for logistics disruptions?
From diversifying suppliers, maintaining safety stock, implementing real-time monitoring systems, fostering strong supplier relationships, and developing flexible transportation are some effective strategies to reduce risks.
Conclusion
Since supply chain logistics is still evolving, it needs new risk strategies to measure and prevent the ever-evolving supply chain disruptions as well. Qodenext , experts in supply chain logistics, offer tailored solutions to navigate challenges effectively, ensuring operational resilience and continuity.
