Resilience in Supply Chains: Navigating Disruptions and Building Sustainable Logistics Strategies

A resilient and sustainable supply chain network offers multiple benefits to firms and helps them enhance their profitability by increasing customer satisfaction and service delivery.

Demanding customers, tightening regulations, and evolving business landscapes have put the focus back on supply chains and logistic networks. Especially after the COVID-19 pandemic, the shift towards digitalization and timely access to products and services couldn’t be overemphasized. McKinsey calculated the cost of supply chain disruptions for an average business and found it eats up as much as 45% of the company’s annual profit over ten years. In the wake of changing business and cost considerations, the 2023 SAP survey found that 52% of global firms believe in a need to improve their supply chains. Further, Euromonitor reveals that 56% of businesses are planning to invest in developing agile, flexible, and sustainable supply chains to enhance efficiency and aid productivity. Sustainable Supply Chain networks will help companies achieve scale by ensuring an uninterrupted flow of material and finished products, these also help firms to maintain their competitive edge over rivals. No wonder, everyone is eager to capitalise on these strengths and achieve a competitive edge on the back of their resilient and sustainable supply chain networks.  If you too are striving to achieve the same then the following strategies can prove to be of immense help:

Diversify Supplier Network

Going by the adage ‘Don’t put all eggs into one basket’, access to a diversified network of suppliers is a key component to building a resilient and sustainable supply chain network. Political uncertainty, climate catastrophes, and socio-cultural disruptions can strike at any moment and hold up the supply from your suppliers and vendors. In case you rely excessively on one or two suppliers, this might wreak havoc and leave you in the middle of disrupted supplies and production shortages. The latest World Economic Outlook report by the IMF showed that diversification of inputs helps organizations to cushion against supply chain shocks and disruptions. Further, the 2022 EY survey revealed that 54% of companies are planning to diversify their suppliers to achieve more sustainable supply chains. Hence, it’s recommended that you source from a diversified network of suppliers that are preferably spread globally across geographies so that disruptions in one part of the world won’t bring your operations to a complete halt.

Optimise Inventory

While concepts such as “Just In Time” help decrease costs, rely fully on these inventory reduction techniques might impede your efforts to build resilient supply chains. The key here is to strike a balance and optimise inventory levels in a manner that helps you stay safe from sudden disruptions and halts in supplies of critical components. Remember, having an optimum stock of critical supplies can help you weather short-term disruptions in supplies while helping you to continue with your production and dispatch as per the original schedule.

Harness Technology

The use of new-age technologies such as AI, ML, and advanced analytics can turn your supply chain into a source of competitive advantage. You can achieve amazing real-time capabilities in tracking, optimising and controlling logistic networks with the help of contemporary innovations. For example, IoT can help with the location and condition of supplies and finished goods, AI can yield profound insights by analysing large swaths of data, and blockchain can enhance the visibility and trust factor associated with transactions. McKinsey found that using AI in inventory management can reduce stockouts and inventory carrying costs by 50% and 20% respectively. These things coupled with ML algorithms and predictive modelling can surely convert your supply chain into a digital marvel.

Nurture Ecosystem

Striving to create a mutually beneficial relationship with all the stakeholders of the value chain is a sure-shot strategy to develop a resilient and sustainable supply chain. Leading global organisations coordinate, collaborate, and nurture relationships with their suppliers which fosters the spirit of respect and integrity in the business. This, in turn, reflects in their superior delivery and enhanced customer experiences, leading to better bottom-line growth and operating profitability. Don’t forget that suppliers and partners are important constituents of the business and treating them as allies can create a world of difference even during turbulent and tumultuous circumstances.

Go Green

With the harmful impacts of climate change becoming much more apparent, the need for sustainable supply chains is fast gaining prominence. A sustainable supply chain entails organisations reducing their carbon footprints, using renewable sources, minimising waste, and sourcing ethically among others. By switching to eco-friendly, holistic, and encompassing logistic networks, firms not only become more efficient and sustainable in their approach but also enhance their brand equity among target audiences significantly. Further, putting efforts to integrate sustainability in all prominent aspects of the business including the supply chain can help firms to contribute to prosperity and the well-being of the society at large.

Scenario Planning

Developing resilience in the supply chain networks mandates a comprehensive understanding of different scenarios that might appear along the way. From political and geographical to social and legal, risk assessments must be done in advance for a range of situations that might crop up unexpectedly. Accordingly, contingency plans are to be put in place for steering the supplies and logistics out of the unexpected circumstances. Such prior planning makes supply chains more resilient and less prone to disruptions, thereby increasing their reliability over a longer period.

The domain of the supply chain is full of disruptions and by developing resilient logistics networks, organisations can thrive in the face of uncertainty. Remember, both resilience and sustainability are anchors of competitive supply chains and by following the strategies mentioned above, your firms can easily navigate in the complex, unpredictable, and disruptive ocean of Global Supply Chain Networks.

This article has been authored by Dr. Shantanu Trivedi, Assistant Professor (Logistics and Supply Chain Management), University of Petroleum and Energy Studies (UPES) and was originally published in the December Issue of the Logistics Insider Magazine.

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