Supply chain failures compromise the ability of an organisation to operate effectively and in extreme circumstances even to survive.
Yet many businesses struggle to mitigate the risk of such failures:
research from CIPS suggests fewer than half of procurement professionals consistently put strategies in place to counter supply chain dangers, while similar numbers haven’t analysed the potential costs associated with supply chain disruption.
That’s potentially disastrous for their businesses.
Procurement fraud alone costs UK businesses £127bn a year by some estimates. And if your organisation doesn’t have good visibility over the resilience of its supply chain, including the extent to which your suppliers are exposed to risk through their own
supply chains, you can’t begin to manage your exposures. Consider the following seven tips for boosting supply chain resilience:
Understand the risk posed by each supplier
Get to grips with the risk each supplier brings to your business – how credible is each of the organisations on which you depend? By getting to grips with issues such as suppliers’ creditworthiness, payments history, data security and their own supply chain
resilience, you can build a much more in-depth picture of any threat they may propose – and manage the danger accordingly. Try to avoid a tick-box approach to evaluating risk – you need a more sophisticated analysis of the different levels of maturity your
suppliers may have.
Do your homework
There’s no substitute for diligent supplier analysis – it’s the only way you can hope to fully understand the extent of the risk they pose. Don’t assume, either, that your suppliers will necessarily have done this analysis for themselves, or that they understand
what kind of a threat they may represent to you and other buyers. They’re certainly less likely to have analysed the resilience of their own supply chains. You may need to work with these organisations to help them become more risk aware.
Build more collaborative relationships
Be prepared to have a dialogue with your suppliers in order to build more trusting and confident relationships that endure over time. Where risks have been identified, what plans, if any, does the supplier have in place to mitigate them? And what might you
be able to do to support them in this process? One option could be to move towards different payment options, shortening payment terms through initiatives such as invoice discounting, for example, to improve their working capital.
Focus on the long term
It’s easy to focus on short-term supply chain gains and easy cost savings – payment practices, for example, may offer an opportunity for a quick win on your organisation’s cash flows. However, supply chain resilience is a long-term, existential concept –
the advantages you may secure from extending payment terms, say, may quickly be eclipsed by the cost of replacing a supplier that unexpectedly goes out of business. Focus on building strong, long-term relationships based on mutual trust with your suppliers.
Be prepared to adapt and evolve
Supply chains – and the suppliers that form the links – can and do change over time, so your practices need to be flexible enough to evolve accordingly. You need tools and technologies in place to ensure ongoing and current visibility across the supply chain
– and the willingness and ability to respond to new risks as they emerge. The closer your relationships to key suppliers, the more chance you have of being able to adapt quickly and effectively.
Build response plans
Once you understand where the risk in your supply chain lies, you can put response plans in place in readiness for the day when a particular danger crystallises. Your organisation needs to be able to quickly determine which supply is affected, which products
and services will be at risk, and what the options for alternate supply might be. Such contingencies will hopefully not be needed, but your organisation should be able to mobilise these response plans very rapidly.
Digitise the supply chain
Better technology will enable you to manage the whole of your supply chain much more effectively – both individually and in aggregate.
By digitising your supply chain management, you free up resources for more value-added tasks – and gain access to new tools that will give you a real-time view of your supply chain resilience.