Business continuity and supply chain

Supply chain continuity is a must have, but that’s easier said than done

Supply chain issues have a direct effect on business performance. When the supply chain suffers, the bottom line suffers. The modern consumer expects speedy, on-time delivery, easy omnichannel fulfilment, and a smooth return process. The company that fulfils those desires is likely to earn repeat business, and vice versa. And more loyal customers lead to better business performance.

The current era is increasingly being defined by the onslaught of complex disruptions, with their disparate origins and long-term consequences. Organisations that are not fully prepared for the new reality, will find themselves reacting separately to each disruption.

Agile organisations tend to have people plan more frequently, put more of their plans into action and leverage planning technology more effectively. These organisations are more prepared for threats and opportunities, from a position of strength.

Prior to the pandemic, most organisations only focused on the top-tier suppliers, leaving many blindsided. It’s critical for organisations map and manage the entire supply chain, to understand the impact that disruptions can cause.

But it’s not a one size fits all solution. The solutions will likely combine several elements: a limited just-in-case approach with redesigned inventory holding; an expanded supply base, including diverse regions and routes; vertical integration where appropriate; and radical transparency across supplier tiers and new operating models and partnerships.

To achieve resilience and responsiveness, organisations need to develop a comprehensive supply chain risk management plan and the capabilities to support it. Such a plan defines how supply chain risks will be managed and may include some the following techniques:

1. Avoiding the risk — changing plans in order to prevent the problem from arising (e.g. employee training, lead indicators)
2. Mitigating risk — lessening its impact through intermediate steps
3. Transferring the risk to another party (e.g. by contract)
4. Accepting that some portion of a risk is inevitable, given the organisation’s work and accounting for that probability (e.g. setting aside a risk fund). This should be a last resort option, given the reputational and financial implications of the option

An integrated supply network design process can enable the company to make decisions in an informed, creative and systematic way that takes into account risk and still finds cost-effective solutions.

According to PECB:

With the focus of many organisations on profitable growth, they also need to consider the risks inherent in new markets, facilities and partners. Critical suppliers should be included in the risk management plan at this early stage to ensure that business continuity and contingency plans are in place.

For many organisations, during supply chain disruption, it’s tempting to find alternatives or back up suppliers. But, according to McKinsey , there is another approach to consider. Organisations could consider redesigning products that are susceptible to supply chain risk. By accommodating and validating a wider range of parts or eliminating unnecessary components altogether, they can create more resilient products, cut costs, and limit delivery problems.

For further information, including proactive steps to resilience, download our business continuity whitepaper here