Supply chains are longer than ever, more complex and vulnerable to numerous risks. 75% of manufacturers were hit with some type of disruption in 2013. According to Sander van Noordende, the Group Chief Executive with Accenture, a significant supply chain disruption can reduce the share price of affected companies by as much as 7%. Common supply chain offenders include:
- Weather conditions
- Natural disasters
- Cyber terrorism
- Oil dependence
- Corporate espionage
The recession of 2008 had many companies slashing costs. Lead times were lengthened and the number of suppliers reduced. Lean inventories got leaner and just-in-time manufacturing created concentrated pools of risk. Unfortunately these cost saving decisions ran contrary to any effort to build resilience into a supply chain.
Many companies were not prepared for the steady stream of natural catastrophes that devastated Asia’s manufacturing over the past few years. These type of risks were hard to quantify because they were low probability, high impact events with scarce existing data. For this reason supply chain disruptions now resides as one of the top-10 enterprise risks.
The Unforeseen Advantage of Resilience
It is fair to say that we now conduct business in an era of increased volatility. Building resilience into a supply chain is difficult because it is hard to incentivize. However a company that plans ahead stands to not only bounce back quicker from potential disruptions, but to actually gain a legitimate competitive advantage. Here are a few ways to build resilience into a supply chain:
- Build your knowledge of your supply chain partners.
- Create a common risk vocabulary between actors.
- Create transparency between partners by improving data and information sharing.
- Understand the risk of loss of any critical link in the supply chain.
- Identify alternate suppliers or contract manufacturers.
- Develop postponement strategies and inventory buffers.
The Take Away
Spending time making a supply chain more resilient is an effective way to reduce risks. Being able to adapt to the new changing circumstances is necessary strategy to stay ahead of the next disruption. Emphasis on reducing costs and increasing rewards does not intersect with building resilience.
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FW Warehousing helps many types of businesses with supply chain solutions, including a wide variety of warehouse services.
FW Warehousing is headquartered in St. Louis, Missouri with Midwest warehouse distribution centers in Kansas City, Indianapolis and St. Louis totaling more than four million square feet. Founded in 1949 with a focus on food-grade storage, FW later broadened its services to include contract warehousing, dry storage, hazardous material and chemical storage, temperature-controlled storage, product distribution and B2B and B2C fulfillment.
FW Warehousing has more than 50 years of experience in third-party 3PL logistics and has been ranked in the top 100 Third Party Logistic Companies in the country by Inbound Logistics magazine.