You know what they say—hindsight is always 20/20. If you’ve ever locked your keys in your car, you probably wish you could go back in time and prevent it from happening. While time travel isn’t an option, thankfully, we can plan ahead for unexpected circumstances to reduce the fallout.

Today’s business environment is distinguished by shorter product life cycles, more demanding customer requirements, and a host of supply chain risks.  

As a supply chain manager, you likely experienced all kinds of disruptions due to:

  • Natural disasters: Floods, storms, drought that stall your operations.
  • Political instability: Uncertainty in your supplier’s government policy on regulatory, tax, property, or human rights law that causes delivery delays or re-routed resources.
  • Supplier delays: Incapability of your supplier to meet your deadline which greatly affects your supply chain.
  • Supply shortages: Insufficient materials to produce your needed products.
  • Cybersecurity threats: Cyberattacks such as data breaches and data theft due to weak security and privacy policies of suppliers.

According to a survey conducted by Deloitte Touche Tohmatsu, 85% of global supply chains had at least one disruption in the past 12 months. If this isn’t alarming enough, that number was before COVID-19. 

The pandemic has further intensified the risks that companies have to deal with on top of the abovementioned typical disruptions. Since the pandemic started, SupplyChainDive reported that 73% of companies are experiencing damaging setbacks in their supply chain due to border controls and other factors caused by COVID-19. 

Never has the supply chain been more at risk than the present time—and having agility and resilience across the entire process is crucial.

So, here are 8 ways to help you build a more agile and resilient supply chain.

1. Identify Your Risk Exposure

The first step is to assess your business and identify which risk exposures are involved within your supply chain. 

When assessing, here are questions you may ask yourself:

  • Does any part of our supply chain have political or geopolitical, weather-related, regulatory, or labor market risks? 
  • Are my products still sustainable to meet customer demands? 
  • Do my suppliers have the qualifications and capacity to meet all our needs and expectations for quality control? 
  • What is the current situation in the home country of my supplier? Did they have policy changes that could affect the delivery time for my supplies? 

By asking yourself these questions first, you can evaluate the potential supply chain disruption scenarios and actively address them.

2. Prioritise Potential Risks

After identifying your business’ risk exposures, you have a starting point in mitigating potential crises. That said, it’s impossible to predict every scenario that might occur. 

Prioritise potential risks by how likely they are to occur and affect your business. Then, analyse and estimate each of its financial and brand impacts if it happens. Begin addressing the risks by developing a mitigation contingency plan, starting from the most likely and highest-impact risks and working your way down the list. 

3. Include Suppliers in Risk Planning

In developing your mitigation contingency plans, you need to also factor in the risks of your suppliers. 

These may include:

  • Regulation compliance 
  • Level of country risk 
  • Their country of origin’s economic and political conditions 
  • Transportation carriers 

You should be aware of the risks that your suppliers may face because that will disable them from delivering their products and services on time and with high quality.  

Further, in your contracts with suppliers, you can specify consequences like termination of contract or paying a hefty fee when your suppliers fail to meet your deadlines. Clauses like this help to minimise impact on your business. 

4. Ensure Quality of Suppliers’ Products and Services 

There are many steps involved in your supply chain, and one of the most important steps is the procurement process. Acquiring materials and products is important in keeping your business running, so it is best to partner with suppliers that have reputable backgrounds. Suppliers aren’t just responsible for delivering your needed materials and products. Your partnership with them also affects your company’s reputation. As such, it’s necessary that you also ensure that your suppliers are working ethically, lawfully, and with quality. 

You need to critique and judge your suppliers based on: 

  • Quality of Goods 
  • Employee Treatment and Management
  • Source of Materials 
  • Partner Interaction
  • Financial Stability 
  • Supplier Viability 

Through this, you can filter and choose only the suppliers capable of producing high-quality products and services to ensure that you can keep delivering products that are vital to your business. More than that, it minimises the risk of halting operations due to poor quality affecting your deliverability rate to your consumers. 

5. Diversify Your Supply Chain

Relying on only one source for your materials and products can become costly and inefficient once a significant disruption in your supply chain emerges. While sourcing only from low-cost locations across the world is seen as more desirable, this increases your vulnerability to supply chain disruption. Cheaper can mean that quality and reliability are not always guaranteed. Suppliers like this are not capable of ensuring that your goods are delivered promptly as some brands have learned.

In 2010, Toyota Motor Corp. lost billions of dollars of sales and costs due to product recalls. This was a direct consequence of a supply chain that relied on using a single part sourced from one supplier. It’s true that it helped them cut costs, but it also became their downfall. 

This shows the importance of connecting with more suppliers to prevent these kinds of incidents. It may increase your overall transaction cost, but it’s more cost-effective and efficient in the long run. 

Here’s your trade-off: Opt to pay more for better protection against disruption, or continue sourcing with lower costs but with a greater chance for disruption? 

Of course, it’s better to pay more and diversify your supply chain. Having suppliers around the world helps avoid supply chain disruptions that can occur due to unpredictable variables like weather, labor, political, and economic events. Beyond that, having reliable primary and secondary suppliers can help minimise the impact on your business’ cost and productivity when disruptions occur. 

6. Monitor Insurance Coverage 

Insurance is vital to many facets of life and your supply chain is no different. 

Ensure that you have insurance that will help you with financing for instances that affect your supply chain. Insurances that you should have include: 

  • Cargo insurance: Protects you from financial loss due to damaged or lost cargo
  • Trade credit insurance: Covers exposures that are related to government instability, actions, and insolvency 
  • Cyber insurance: Covers data breaches and technology-driven business interruptions   
  • Contingent business interruption coverage: Protects you from any physical damages caused by suppliers 

After obtaining these, check if your suppliers also have their necessary insurance. 

These different types of insurance will significantly help you minimise the impact on your business due to external and internal threats to your supply chain. While it can seem daunting to track  and organize all of them, there are tools out there to help.

Monitoring insurance is seamless with a single repository such as our software, oFlow. Our platform reduces the friction between all the processes from taking a brief from a client, monitoring requirements, all the way to shipping. OFlow consolidates all documentation of your insurance and suppliers’ insurance for a quick assessment of the coverage and its significance in lessening liability exposure. 

7. Communicate and Be Transparent 

Another key aspect to consider are the wants and needs of your buyers. Your competitors are also competing for their attention with the next best thing—that means you need to adapt as well. Market demands are constantly changing and your consumers often dictate that.

Consumers prefer purchasing products that make them feel that they were created just for them. This means that supply chains must continuously evolve alongside consumer demands to keep up with today’s quickly changing environment of heightened customization expectations. 

To minimise the risk of falling behind and having too much leftover inventory, it’s best to communicate and be transparent with your suppliers. 

Share information with your partners on sales projections and include them in product design changes to ensure that they have the right products available when needed. If a forecast unexpectedly drops, let them know too so that you can work together on solutions on changes in demands. This will allow you to join forces in identifying issues, solving potential problems, and reducing any fallout. 

8. Review Risks Regularly 

Changes in your supply chain, whether minimal or significant, can cause a chain reaction that either increases or decreases the risk in your area. Knowing this, you should review your risk scenarios often to identify new risks, reprioritise, prepare, and protect your supply chain from future disruptions. 

Some areas you should regularly review are: 

  • Legislation changes that may affect your suppliers ability to produce and deliver materials and services 
  • Change in work environment such as new management 
  • New materials introduced in your supply chain 

In today’s world of increasingly interconnected and interdependent risks, the resiliency of your supply chain depends on how well you can manage unexpected business disruptions. Having knowledge on current and new risks will help you monitor the effectiveness of your risk treatment strategies and ensure business continuity.  

Agile Supply Chain = Better Risk Mitigation 

Having a diversified and adaptable supply chain is vital to business continuity. Thankfully, with the right tools and strategies in place, you can minimise the risks of supply chain disruptions.

Using the tips provided above, you’ll be more prepared to immediately address and solve a crisis when it occurs. Investing in technology and being agile gives you a better chance of mitigating risks in your supply chain quickly. Going agile also means you can easily modify and divert your supply chain to lessen your vulnerability when unexpected things like natural disasters, supplier delays, or cybersecurity breaches happen. 

Now, with the fast-changing business environment and constantly shifting landscapes, having an agile business is more important than ever. You can get started by working with a sourcing provider that already invested in an agile technology, like Good for Life. With our one platform communication, it’s easier to connect with your suppliers and promote transparency throughout the process. 

We also work with suppliers from across the world to decentralise your supply chain and focus on sustainable sourcing. By promoting environmentally friendly and ethical practices with our partners, you can be confident we align with your values. 

Contact us today to strengthen resilience in your supply chain in a way that is good for business, good for customers, and good for life.