How to build supply chain resilience

The world is unpredictable, and if your business’s supply chain gets caught in these disruptions, your annual revenue could take a 10 percent hit. One minute, everything’s smooth sailing. The next, you’re hit by a tsunami of delays, shortages, and skyrocketing costs.

But what if you could be prepared to tackle them before they even strike?

Up ahead, we discuss the importance of supply chain resilience in business and how to make your supply chain more agile, adaptable, and positioned to recover rapidly.

Can you afford to overlook supply chain resiliency?

Today's supply chains face unprecedented risks from trade wars, civil unrest, extreme weather, and volatile market dynamics. Resilience is the ability to stomach these risks without hampering the growth of your business. And resilience in supply chains is essential for survival and continued profitability in uncertain markets.

So, the short answer: You must recognise supply chain resilience.

The previous decade brought havoc with a pandemic, geopolitical tensions, and environmental catastrophes. Many supply chains were either bent or completely fractured. This compelled global businesses, especially SMEs with low-risk appetite, to prioritise resilience. Over 75% of supply chain executives deem it essential for their company.

And it’s no surprise, given the stark difference between vulnerable and resilient supply chains.

So, how do you build a resilient supply chain for your business? Here are our top strategies!

Building supply chains: top 5 strategies

A resilient supply chain has four pillars supported by clear governance structures and significant enablers like people, processes, and technology.

Here’s how businesses can strengthen these verticals and start risk-proofing their supply chains:

1. Take a multi-threaded procurement approach

   Don’t put all your eggs in one basket. Spread the risk by diversifying your suppliers for critical components and raw materials. So:

   • Negotiate contracts with multiple suppliers overseas or locally. Sign dual-source agreements and longer-term contracts with partners who operate from various locations.
   • Avoid extensive reliance on cheap offshore manufacturers, as a slight disruption in global markets may throw your supply chain off completely.
   • Invest in onshoring, nearshoring, or friendshoring your raw material.
   • Consider redesigning products to reduce reliance on vulnerable sources for components.

2. Aim for diversity in your shipping network

   You have limited control over factors impacting your shipping lanes. So, relying on a single route or transport mode can be costly in the face of disruptions. To tackle this:

   • Use multi-modal transportation for cost-effectiveness. If a port is crowded, consider an alternative port and cover more distance via inland.
   • Map out alternatives to your major trade routes. It will ensure supply continuity in case of blockages or congestion.
   • Expand to new geographies to absorb massive demand hits in a single market.
   • Use multiple distribution centres and warehouses.
   • Outsource fulfilment to save massive costs of in-house operations and scale up and down as per business needs.

3. Gain better control over your inventory

   Inventory disruptions can do severe damage to your profits. While excess is costly, stockouts can pull up your entire supply chain. A few things to make your inventory adaptable:

   • Keep safety stock buffers for critical items to avoid stockouts during disruptions. Determine buffer quantities based on historical data on demand and lead times.
   • Use AI-powered replenishment algorithms that automatically adapt inventory orders and production schedules based on demand fluctuations and supply risks.
   • Maintain open communication and data sharing with suppliers to gain visibility for dynamic inventory management and procurement.
   • Utilise rapid response and transportation modes like air freight to expedite the flow of high-priority components or orders.
   • Implement end-to-end inventory tracking technologies for real-time visibility across supply chain facilities and in transit.

4. Optimise your processes to mitigate supply chain risks

   Proactively identify and address vulnerabilities across the existing supply chain in your business. Here’s how:

   • Risk assessment: Pinpoint weak spots like single points of failure, concentration risk, and pinch points. For example, a critical facility or route could be vulnerable to natural disasters or political conflicts, jeopardising inland transportation.
   • Risk management: Develop contingency protocols that outline steps to be taken in case of specific supply chain disruption scenarios.
   • Risk avoidance: Take adequate insurance coverage and prioritise cybersecurity and data privacy in your operations to reduce risks.

5. Leverage supply chain technology for visibility and agility

   Digital capabilities provide the much-needed supply chain visibility and analytical power to build resilient, responsive networks. So:

   • Track and analyse shipment data: Implement end-to-end tracking technologies to gain real-time visibility about your shipments. Enable data sharing with customers, suppliers, and logistics partners using API integrations.
   • Choose logistics partners who offer control room capabilities for complete supply chain visibility, alerts, and coordinated response in case of any emergencies.
   • Stay updated about emerging trends and technologies in your field, like blockchain, automation, robotics, and digital twin simulations. Visit our Logistics Insights hub to uncover the latest research and innovations in the industry.

Planning and preparing for a responsive, resilient future

By implementing these strategies, you can equip your business with the flexibility, adaptability, and foresight to navigate any challenges and thrive in the face of uncertainty. Safeguard your supply chain with streamlined, agile processes and integrated logistics.

Maersk can help you build resilient supply chain ecosystems that foster continued growth. Explore our supply chain solutions like Maersk Flow — bringing visibility to your everyday operations, from purchase order management to final delivery. With Maersk Flow you can manage all shipments from any carrier or freight forwarder.