Almost since 1982 when Keith Oliver coined the term supply chain, analysts, reporters, academics, and consultants have written about supply chain resiliency.For an equal amount of time, the global trading community has largely ignored the issue and not invested in solutions designed to dramatically increase a company's supply chain resiliency, flexibility, and agility. This stems from the historical orientation of a company to be inwardly focused. However, since globalization is the driver for broad business growth a company should be equally focused on the global supply/demand networks. This is rarely the case.Any company that trades globally or depends on products that are sourced globally are going to find out what resiliency means. The resiliency of its global supply chains are going to be stress tested.The U.S. imposed the first round of punitive tariffs on Steel and Aluminum against its major allies and adversaries - citing security measures. On July 6 The U.S. imposed a 25% punitive tariff on $36 Billion of Chinese products and on July 11th another $200 Billion. (The U.S punitive tariffs on China could very quickly escalate to $450B worth of product ). While all this is interesting, the fall-out will be significant for business and consumers alike.For some businesses, the disruption created will prove life-threatening. Regardless of what they try, they will not be able to adequately respond. For other companies, it may prove life-threatening because they do not have the ability to reconfigure their supply chains. These companies will live or die based on the lack of resiliency built into their supply chains.
What is Supply Chain Resiliency?
Supply chain resiliency is the ability of the supply chain to bounce back from hardship. And today there is extreme uncertainty, and more pending hardship, in the global trade environment. The exact magnitude of that hardship will affect industries and companies differently. Supply chain hardship will be broadly felt and effect finished goods distributors and manufacturers alike.When supply chain disruption strikes, response time is vital to minimizing negative results.
6 capabilities of a resilient supply chain
- Visibility into product/SKU across all supply chain nodes and vectors. A node is any point where the product/SKU is at rest. A vector is any route where the product/SKU is in motion.
- Node visibility is essential are at the source (suppliers factories) and inventory (consolidators, manufacturing facilities, distribution centers). Seeing the availability of SKUs from a total supply chain perspective is essential in being able to support the total management of a product. The ability to reconfigure the supply chain quickly is dependent on understanding product availability and match it effectively with demand.
- Vector visibility is critical to supply chain resilience because it provides cost and time factors related to any given route. It enables the redistribution of a product/SKU that is in motion to meet the more immediate demand requirements while eliminating needless costs. With vector visibility, a company has the exceptional flexibility to adjust product/SKU allocation on the fly. Allocation of SKUs is possible enabling direct delivery, cross-docking, or complete rerouting of goods in transit.
- Visibility into projected total landed cost by source/origin combination. In order to optimize product/SKU positioning in times of disruption, having an understanding of the landed cost is essential. With automated full landed cost budgeting and estimating capability from supply-side perspectives (sourcing, purchasing, transportation, and inventory) to fulfillment, a company speeds decision activity that optimizes inventory positioning based on required demand/supply outcomes.
- Flexible, configurable sourcing. To mitigate supply chain disruption is the ability to quickly reconfigure purchase order fulfillment plans in collaboration with suppliers. Supply chain resiliency requires quick response and communication with suppliers, factories, 3PLs, and consolidators to reorganize off-take of purchase orders. When serious disruption occurs supplies are often stretched and ensuring that product is distributed optimally requires quick analysis of outstanding SKU availability and optimal fulfillment options across the entire supply network.
- Agile transportation management. Understanding transportation options in a time of uncertainty and disruption is key to minimizing supply chain risk and optimizing fulfillment requirements. Having a TMS solution that provides insight into the exact status of freight contracts and supports rapid deployment adjustment is fundamental for supply chain resiliency. Positioning assets effectively require visibility into the contract obligations so that meaningful options and actions can be exercised quickly.
- Centralized Trade Compliance control augmented with regional expertise. Centralized trade compliance is an important cornerstone for global supply chains resiliency. Determining which product is best suited for what destination requires access to cross-country tariffs, fees, and regulatory import and export rulings to help expedite shipments through the border at the most optimal duty rates and ancillary cost. Being able to not only see and understand the tariffs and fees but to be able to have access to rulings and regulatory information is essential to being able to reconfigure supply chains to mitigate disruption.
- FTZ optionality. An FTZ can provide a manufacturing company with a very high level of flexibility and resiliency. It provides a company with the flexibility to optimally source components and raw materials and configure finished products to take advantage of lower rates of duty. When tariffs increase so dramatically, the opportunity to locally manufacture or assemble products made from both foreign and domestic production can yield dramatically lower product cost.
Resiliency is Strategic for Global Supply Chain Success
Resiliency has always been an important element for managing global supply chains. However, because the global economy has gone through unprecedented growth over the past 70 years, with few seriously disrupting events, most organizations have been able to avoid the need to build resiliency into their supply chains, without consequence. In a trade environment that is highly confrontational, uncertain, and aggressive the probability of massive supply chain disruption is growing and the consequences can be dire.For a company to build resiliency into its global supply chains it must make a strategic commitment. A company must build an infrastructure that supports resiliency capabilities.Fortunately, there are powerful solutions that allow companies to acquire resiliency capabilities at a manageable cost. This was not the case as recently as 5 years ago.