Adaptability is the Key to Creating Resilient Supply Chains
June 12, 2020
For any company that makes commodities, taking steps to create resilience in your supply web can make or break the survival of your business when confronted with unforeseen events. Creating supply web resilience means having processes, systems, and/or technologies in place to ensure the continued success and longevity of your supply and relationships over time.
In the manufacturing industry, resilience means one main thing: Adaptability.
| But first, what’s a Supply Web?
You are familiar with Supply Chains – the linear view of the processes that contribute to the production of a commodity. In a typical Supply Chain model manufacturers function as links in a chain through which information and goods travel in a two-way linear fashion: up and downstream.
A Supply Web is a networked model of outsourced manufacturing management. Think of every contributor to a commodity – every material provider, component manufacturer, assembly house, 3PL, and OEM – as a node. Each node is part of an interconnected many-to-many network that shares information, communicates, and collaborates. In this model, information flows between and amongst every node and is distributed network-wide simultaneously. It is similar to the connectivity model of a social network. Each member is part of the same platform, can interact in the same ways, follows the same rules, and maintains existing connections, and discovers new ones. At scale, a Supply Web would be a digital map of all of the globe’s manufacturing resources, capabilities, and connections.
Each company has its own Supply Web – the nodes of the global whole they interact with. It is comparable to your own neighborhood in a vast city. This includes every node, from raw materials all the way to logistics that touch your product before it reaches its destination.
| Resilience through Adaptability
Supply Web adaptability is the capability of a company to efficiently manage and react to changes or disruptions (political changes, natural disasters, pandemics, resource shortages) without substantial negative impacts on time, cost, quality, or performance. Potential disruptions include:
- Geopolitical, trade and tariff changes
- Natural disasters
- Human pandemics
- Resource shortages
Businesses can implement several strategies to build adaptability in their supply webs including (A) diversification strategies and (B) agility strategies.
(A) Diversification Strategies
Proactive business owners place a high value on geographic diversification of their sources. It is important to have access to sources from diverse areas of the globe to mitigate risks in the event of geopolitical and geographic emergencies or changes in supply. There are two main ways to approach geographic diversification of supply webs:
- Redundant Multi-sourcing. Ramping and maintaining multiple sources for any given product over time, in order to decentralize production and mitigate risks. This is a high-cost and proactive approach ideal for enterprise-scale manufacturers.
- Agile Multi-Sourcing. Having ready access to a large network of trusted sources that can respond quickly and reliably meet your expectations to ramp up production in the event of a disruption. This is a low-cost proactive approach ideal for small-to-medium OEMs.
(B) Agility Strategies
To create resilience through agility, a company must employ tools and procedures to quickly respond to changes, disruptions, and growth. This includes taking proactive steps to establish:
- Scalability. Working sources that can grow with you over time from the very beginning, or have the ability to quickly and reliably find new sources as your company grows.
- Collaborative technology and data sharing. Proactively adopting innovative, collaborative technology will enable businesses to maintain centralized data, records, and communication when working with remote teams or ramping up multiple suppliers.
- A culture of employee adaptability. By creating a culture of continuous improvement and learning, employees will more easily adapt to changes in operations or technology.
- Consistent market research. Keeping up with consumer trends, new technologies, and strategies will ensure you stay up-to-date in competitive global marketplaces.
| Finding the right mix of strategies and tools
Creating resilience and adaptability is essential to businesses survival in the manufacturing industry. Finding the right mix of strategies and tools for your company requires proactive action based on your company’s size, market and goals. As the manufacturing industry matures into a digital era, it is time to start harnessing supply as it truly is – a networked ecosystem instead of siloed chains. Innovative and adaptive tools to harness the Supply Web are emerging – will you be part of the evolution?
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