Risk in the supply chain creates pressure. Pressure on a supply chain can snowball throughout a network. Often this results in problems that reverberate across internal, and customer processes. The question is; how do you minimize risk without compromising the quality of service, or profitability?
These pressures on supply chain come from a variety of sources, including geopolitical changes, natural disasters, labor disputes, inventory problems, manufacturing problems, capacity issues, and others. While lean concepts such as JIT, virtual inventory, and supplier rationalization reduce total supply chain costs, they also increase, or magnify risk when the external problems occur. For example, investing a just-in-time strategy along with VMI where practical to reduce carrying costs and shipping expenses takes time and can be costly to fully implement. Getting to ROI (Value in system) means operating these lean systems with synchronicity – which creates pressure. If your key supplier goes through a labor dispute that is having ‘difficulty’ keeping up with delivery schedules this will impact more areas like customer service, shipping costs and others.
Having a solid B2B integration, or EDI strategy and infrastructure enables companies to pivot when they need to. In the earlier example, the company should be able to switch to an alternate supplier, or balance orders across both as needed, therefore mitigating risk.
Organizations need to regularly identify, quantify, and then prioritize risks they are facing. From there, develop strategies to mitigate each holistically. For example, having several sources of capacity in the form of suppliers, and being able to leverage them quickly can help reduce the chance of supply chain disruptions. A diverse supplier group, even in overlapping regions can help when a country, or region experiences a disruption.
With the current pandemic, and the continually changing geopolitical changes, companies are altering traditional approaches to how they do business. Many companies are adopting new models to help products reach consumers quickly and safely. Companies want to be close to customers and service them in a more agile way to improve consumers’ experience.
One critical ingredient is being able to dovetail integration and other technologies in a flexible framework. Deploying technology so your teams can adapt to change rapidly is essential to responding to, and managing risk.