The COVID-19 pandemic and ongoing global tensions have made strong supply chains more important than ever. Almost 80% of supply chain leaders said their companies faced big supply chain problems in the last year1. Yet, only about 22% said their supply chains were really strong against big shocks in the last year1.
This has made governments, big groups, and companies focus more on making strong supply chain plans. They want to manage risks better.
To deal with the ups and downs, companies need to measure and manage their supply chain’s. They should use data and key performance indicators (KPIs). This helps find weak spots, see financial risks, and plan how to get stronger.
Key Takeaways
- Measuring supply chain resilience is key to handling disruptions and keeping business going.
- Companies that check how well they handle supply chain problems are 3.4 times more likely to handle big shocks well1.
- Leaders who use metrics to track supply chain issues are 55% more likely to have clear plans1.
- Resilience metrics should fit the company’s specific needs and goals.
- Measuring teamwork, forecasting, data speed, and how well things run are important for supply chain strength2.
Introduction to Supply Chain Resilience
Supply chain resilience is when a company can quickly adapt and bounce back from unexpected events. These events can be natural disasters, economic downturns, or political conflicts. A resilient supply chain is agile, reacting fast to keep operations running smoothly3.
The best resilience comes from knowing what risks are coming and fixing them before they happen.
The Importance of Resilient Supply Chains
In today’s fast-changing world, having a resilient supply chain is key. It helps a company stay strong even when things go wrong. This way, they can keep doing business and avoid big losses4.
Building a resilient supply chain lets companies quickly adapt to new situations. They can meet customer needs fast and keep goods flowing.
Challenges and Risks in Supply Chain Management
Supply chain management faces many challenges like disruptions and unreliable suppliers. Market changes and bad inventory management also pose risks3. These can hurt a company’s ability to serve customers well and stay profitable.
To beat these challenges, companies need to work on making their supply chains more resilient and agile.
| Metric | Description |
|---|---|
| Days to ‘normalcy’ | Measure the time it takes for the supply chain to return to pre-disruption levels3. |
| Elasticity of volumes | Measure the company’s ability to adjust critical component volumes over time3. |
| NPI responsiveness | Measure the supply chain’s speed in responding to new product introductions3. |
| % of critical components with alternate supply chains | Monitor the percentage of critical components with established alternate supply chains3. |
| % of Risk assessments completed for major suppliers | Track the completion rate of risk assessments for major suppliers to ensure comprehensive coverage3. |
| Suppliers below risk thresholds | Monitor and reduce the number of suppliers falling below acceptable risk thresholds3. |
Building a Resilient Supply Chain Network
In today’s world, companies need to make their supply chains strong. This helps them keep running even when things go wrong. It’s key to manage risks well to plan for any problems5.
Enhancing Supply Chain Risk Management
Good risk management means looking ahead and planning for different problems. This includes issues with suppliers, changes in the market, and following rules5. Using new tools and data helps companies see how big a problem could be. This lets them make plans to fix it5.
Stress Testing Supply Chain Resilience
Testing how strong a supply chain is is very important. It means trying out different kinds of problems to see how well it can handle them5. By comparing themselves to others, companies can find ways to get better. This makes their supply chain more flexible and quick to respond5.
| Key Resilience Factors | Description |
|---|---|
| Complexity | The interconnected nature and scale of modern supply chains, which can increase vulnerability to disruptions6. |
| Supplier Diversification | Maintaining a diverse network of suppliers to mitigate the impact of individual supplier disruptions5. |
| Inventory Management | Efficient inventory planning and control to ensure the availability of critical supplies during disruptions5. |
| Visibility and Transparency | Leveraging technologies to enhance end-to-end supply chain visibility and data-driven decision-making6. |
By focusing on these key areas, companies can make their supply chains strong. This way, they can face unexpected problems and stay ahead in the market56.
Measuring Supply Chain Network Performance
It’s key for companies to measure their supply chain’s performance well. This helps them see how resilient their supply chain is, find weak spots, and plan how to fix them. By watching key performance indicators (KPIs), businesses can understand how well their supply chain handles and bounces back from problems7.
Important supply chain performance metrics include on-time delivery (OTD) rate, damage-free delivery rate, and more. These metrics show how efficient, reliable, and quick the supply chain is. They help businesses make smart decisions based on data.
| Metric | Formula | Benchmark |
|---|---|---|
| On-time Delivery (OTD) | OTD = (On-time deliveries) / (Total deliveries) x 100 | Maintain at least a 95% OTD rate7 |
| Damage-free Delivery | Damage-free delivery rate = (Damage-free deliveries) / (Total deliveries) x 100 | Aim for 100% damage-free deliveries or don’t drop below 95%7 |
| Customer Order Cycle Time | Customer order cycle time = (Actual delivery date) – (Purchase order creation date) | Aim for a customer order cycle time of 2 days7 |
| Freight Bill Accuracy | Freight bill accuracy = (Number of correct freight bills / Total freight bills) x 100 | Aim for 100% accuracy to avoid billing issues7 |
| Inventory Turnover | Inventory turnover = Cost of goods sold (COGS) / Average inventory value | Aim for an inventory turnover rate between 2 and 47 |
Companies should also look at soft metrics like customer service and employee happiness. These help understand the whole picture of supply chain resilience7. By using a wide range of KPIs, businesses can better manage their supply chain network performance. This leads to ongoing improvement and better resilience7.
Also, new tech like RFID and GPS tracking gives real-time views of supply chains. This makes it easier to measure performance and spot risks7. By keeping an eye on these metrics, companies can tackle supply chain issues. This ensures they stay competitive and keep their business running smoothly.
Supply Chain Resilience Metrics
Organizations can use many KPIs to measure and manage supply chain resilience. These metrics help track how well the supply chain responds, how much inventory is available, and how reliable deliveries are. They also look at how stable suppliers are8. By using these KPIs in a scoring system, companies can see how resilient their supply chain is. They can also compare themselves to others in the industry9.
Key Performance Indicators (KPIs)
Here are some important KPIs for supply chain resilience:
- Inventory Availability: This tracks how often deliveries are on time and how often there are stock-outs.
- Supply Chain Responsiveness: It looks at how fast a company can respond to disruptions and start fixing things.
- Supplier Stability: This checks the financial health and reliability of key suppliers.
- Delivery Performance: It measures how often deliveries are on time and complete.
Resilience Scoring and Benchmarking
Top companies use a scoring system that combines many KPIs into one resilience score9. This score looks at both how well the supply chain works and its strategic plans. It gives a full picture of a company’s supply chain resilience9. By comparing their score to others, companies can find areas to get better and focus on making their supply chain more resilient10.
| Supply Chain Resilience Benchmark Metrics | Description |
|---|---|
| Operational Resilience | Looks at how well a company can prepare, plan, and respond to disruptions. |
| Strategic Resilience | Checks how well a company can lead, build, and change, along with how it adapts. |
Using these metrics and benchmarking tools helps companies understand their resilience. They can see what’s strong and what needs work. This lets them make smart choices and invest in making their supply chain more resilient8910.
Strategies for Improving Supply Chain Resilience
Building a strong supply chain is key for businesses facing global disruptions. Two main strategies are reshoring or nearshoring production and spreading out suppliers.
Reshoring and Nearshoring
Reshoring means moving production back to the home country. Nearshoring is about getting supplies from nearby countries. Both can make supply chains stronger11.
One big problem is when production stops. This can cut a company’s earnings by 30% to 50%11. Shorter supply chains and less risk of global problems help a lot12. Nearshoring also makes communication and monitoring easier, making supply chains more flexible12.
Supplier Diversification and Risk Assessment
Supplier diversification is another big strategy11. Almost all businesses have faced supply chain problems in the last year11. To avoid relying on one supplier, companies should use many suppliers and check their reliability often12.
Using many suppliers helps avoid delays and quality problems. This makes supply chains more resilient12. It also creates supply chain redundancy, protecting against supplier issues.
11 A McKinsey survey found many companies had to change plans because of supply chain problems11. Doing supplier risk assessment helps find and fix problems before they happen12. Ways like having more stock and making more partnerships can also help a company bounce back from supply chain issues12.
| Strategy | Description | Benefits |
|---|---|---|
| Reshoring and Nearshoring | Bringing manufacturing or services back to the home country or nearby countries |
|
| Supplier Diversification | Sourcing from multiple suppliers instead of relying on a single source |
|
| Supplier Risk Assessment | Proactively identifying and mitigating potential vulnerabilities in the supply chain |
|
By using these strategies, businesses can make their supply chains stronger. This helps them deal with disruptions and keeps operations going13. Companies that are resilient do better than others in tough times, with a big difference in performance13.
Leveraging Technology for Resilience
In today’s fast-changing business world, technology is key to keeping supply chains strong. Supply Chain Management Software, Predictive Analytics, and Artificial Intelligence (AI) help companies stay agile and quick to respond. These tools make supply chains more visible and flexible.
Supply Chain Management Software
Supply Chain Management Software is vital for resilience. It includes Transportation Management Systems and Warehouse Management Systems. These systems offer full Supply Chain Visibility, letting companies track shipments and inventory in real-time14.
They also help automate key processes. This makes it easier for companies to handle the complex modern supply chain. It also helps reduce the effects of Supply Chain Disruption.
Predictive Analytics and AI
Predictive Analytics and Artificial Intelligence (AI) have changed the game. They help predict and prevent disruptions by analyzing data and patterns15. AI models can spot risks early, helping companies stay ahead of problems.
- 88% of companies say being agile is key to handling market changes and disruptions15.
- 73% of businesses see resilience as crucial for keeping operations running smoothly during tough times15.
- AI boosts demand forecasting accuracy by 25%15.
- IoT cuts supply chain lead times by 30%15.
By using new technologies, companies can make their supply chains more resilient. This helps them face and adapt to today’s business challenges1415.
As the business world keeps changing, using Supply Chain Management Software, Predictive Analytics, and Artificial Intelligence is vital. It helps companies deal with uncertainty, reduce risks, and bounce back from disruptions.
Case Studies: Companies with Resilient Supply Chains
Some companies have shown great strength in their supply chains during the COVID-19 pandemic. They used a mix of ways to make their supply chains stronger. This helped them face challenges better16.
The high-tech industry has also made big steps in making their supply chains strong. A company called Resilinc says the top 30 tech companies have improved their supply chain strength. They have seen their Resilinc R Score® metrics go up over the last year17.
| Company | Resilient Supply Chain Strategies |
|---|---|
| Apple Inc. | Diversified supplier base, leveraged predictive analytics to anticipate disruptions, and implemented digital supply chain visibility tools. |
| Cisco Systems | Utilized scenario planning and stress testing to identify vulnerabilities, invested in supplier development, and implemented robust business continuity plans. |
| Intel Corporation | Focused on supplier risk assessment, established multi-sourcing strategies, and deployed advanced supply chain management software. |
These companies worked hard to make their supply chains strong. They did things like diversify suppliers and use digital tools. Their efforts helped them deal with the pandemic and prepare for future problems17.
The COVID-19 pandemic was tough, but these companies are leading the way in supply chain strength. They used new ideas and technology to set high standards. Their success gives others ideas for making their supply chains stronger16.
Developing a Supply Chain Resilience Maturity Model
To improve supply chain resilience, companies can create a supply chain resilience maturity model. This model shows the different stages of resilience. It helps businesses see where they stand and plan to get better18.
The supply chain resilience maturity model is a guide for checking resilience levels. It has levels from basic plans to advanced risk management. By knowing their level, companies can find what needs work and plan to get better18.
- Level 1 has basic plans for handling supply disruptions with some insight18.
- Level 2 has a team focused on risk and response with some market insight18.
- Level 3 uses tech and analytics for ongoing business and risk management18.
- Level 4 works with partners for better risk handling and uses analytics for management18.
The Resilience Maturity Model scores points for things like plans and team focus18.
Using a supply chain resilience maturity model helps companies assess their resilience. They can then work on improving risk management and partnerships. This makes their supply chain stronger against surprises19.
| Maturity Level | Key Characteristics |
|---|---|
| Level 1 | Structured processes for supply disruption response with insights into utilization patterns |
| Level 2 | Supply Chain team leads in risk mitigation and response with some insight into market intelligence and clinical equivalents |
| Level 3 | Dedicated programs and Supply Chain teams using technology, analytics, and predictive models for business continuity and risk mitigation |
| Level 4 | Collaborative program based on partnerships and knowledge-based collaborations for risk preparation and response, using analytics for continuity management |
Creating a strong supply chain resilience maturity model needs careful work. It must convince leaders to invest in improving resilience19.
Measuring Supply Chain Resilience: Best Practices
Measuring supply chain resilience needs a detailed and organized method. Companies aim to make their supply chains stronger. They use best practices to get insights, keep improving, and meet their business goals.
One key practice is to match resilience metrics with the company’s goals and main tasks. This makes sure the data collected is useful for making smart decisions20. Metrics like Mean Time to Recovery (MTTR) and Supply Chain Visibility show how well the supply chain can handle and get back from problems.
It’s also important to regularly check and update these metrics. As the business and supply chain world changes, so should the metrics20. This means looking at new challenges, trends, and feedback to keep the metrics up-to-date and effective.
Putting resilience data into overall supply chain reports is key21. By linking resilience metrics with other important KPIs, companies can see how their supply chain is doing. This helps in making smart decisions and improving the supply chain’s resilience.
Using these best practices is vital for companies to deal with today’s complex global supply chains21. It helps them reduce risks and do well even when things go wrong.
| Metric | Description | Importance for Resilience |
|---|---|---|
| Mean Time to Recovery (MTTR) | Measures the average time required to recover from a supply chain disruption. | Indicates the speed at which the supply chain can bounce back from disruptions. |
| Supply Chain Visibility | The extent to which an organization can track and monitor supply chain activities, from raw materials to final delivery. | Enhances the ability to identify and respond to potential disruptions in a timely manner. |
| On-time In Full (OTIF) Delivery Rate | The percentage of orders delivered to customers in full and on time. | Reflects the reliability and responsiveness of the supply chain, which are critical for resilience. |
| Supply Chain Flexibility | The ability of the supply chain to adjust and adapt to changes in demand, supply, or other disruptions. | Enables the supply chain to absorb and recover from unexpected events, enhancing its resilience. |
The Role of Collaboration and Transparency
Building a strong supply chain often needs everyone working together. This includes suppliers, logistics providers, and customers. By being open and sharing information, we can spot and fix problems together. This way, we can all work better to solve issues10.
Working together in the supply chain is key. It helps us build strong relationships and share risks. When we all work as one, we can handle problems better, make things run smoother, and keep getting better22.
- Working closer with suppliers can make deliveries on time and improve forecasts22.
- One car maker in Europe saved 7% on stock, got 13% better at delivering, and cut 10% on shipping costs. They used a new platform for working together22.
| Collaboration Strategies | Key Benefits |
|---|---|
| Horizontal Collaboration | Shared resources, reduced costs, innovative solutions |
| Vertical Collaboration | Improved visibility, better demand forecasting, streamlined operations |
| Cross-Functional Collaboration | Aligned goals, faster problem-solving, enhanced agility |
By choosing to work together and be open, we can make our supply chains stronger. They can handle problems better and find new chances1022.
Supply Chain Resilience in the Future
The global economy faces many challenges. Building strong supply chains is now more important than ever. New trends and ideas in supply chain management are helping companies get ready for the future.
Embracing Digital Transformation
Digital technologies are changing how supply chains work. Tools like predictive analytics and artificial intelligence help companies see things clearly in real-time. This makes them more agile and able to handle problems quickly23.
Sustainable and Circular Practices
Being green is also key for strong supply chains. Companies that use resources wisely and reduce waste are more flexible and quick to respond23. This green approach helps them stay ahead and protect their future.
Advanced Risk Modeling and Scenario Planning
Businesses are using new tools to predict and prepare for problems23. These tools help spot weak spots and plan for the future. This way, companies can handle surprises better.
The future of supply chains is exciting and changing fast. It’s all about using new tech, being green, and planning for risks. Companies that keep up with these trends will do well in the future.
| Country | Hourly Wage Comparison to US |
|---|---|
| China | 26% |
| Mexico | 14% |
| Malaysia | 1% |
| Thailand | 15% |
The future of supply chains will be shaped by new trends and ideas2324. Companies that stay flexible and proactive will do well. They’ll be ready for whatever comes next.
Conclusion
Building a strong supply chain is key for businesses today. They can do this by moving production back home, working with many suppliers, and using new tech. This makes their supply chain quick, flexible, and ready for surprises25.
Agility, speed, clear views, flexibility, and teamwork are important for a strong supply chain25. These help businesses bounce back fast from problems.
Supply chain strength is very important. Every year, 75% of companies face supply chain issues26. Having good plans, managing risks well, and working with suppliers helps a lot25.
Being ready for problems before they happen is smart. This way, companies can handle big challenges like natural disasters or pandemics25.
Being committed to a strong supply chain helps companies serve their customers well. It keeps them ahead of the game and ensures success in the long run. The ideas shared here give a clear plan for making supply chains stronger26.
As experts keep studying how to make supply chains better, we’ll see new ways to improve. This will help shape the future of this important business area.
References:
- Looking to make your supply chain more resilient? Measure it. – https://www2.deloitte.com/us/en/insights/focus/supply-chain/supply-chain-resilience-measurement.html
- How Do You Measure Supply Chain Resilience? – https://blog.flexis.com/how-do-you-measure-supply-chain-resilience
- Supply Chain Resiliency Metrics – https://www.linkedin.com/pulse/supply-chain-resiliency-metrics-sriram-raghavan
- Building Supply Chain Resilience: Strategies & Examples – https://www.stibosystems.com/blog/building-supply-chain-resilience-strategies-examples
- Supply Chain Resilience: Examples and Strategies – https://www.altexsoft.com/blog/supply-chain-resilience/
- Building a Resilient Supply Chain – https://scmedu.org/building-a-resilient-supply-chain/
- How to Measure and Improve Your Supply Chain Metrics – https://www.shipbob.com/blog/supply-chain-metrics/
- PDF – https://www.supplychainbrain.com/ext/resources/secure_download/KellysFiles/WhitePapersAndBenchMarkReports/Resilinc/R_Score_Whitepaper_March_2017.pdf
- PDF – https://www.ascm.org/globalassets/ascm_website_assets/docs/the-resilient-supply-chain-benchmark-methodology-report.pdf
- Resilient supply chain for procurement – https://www.strategyand.pwc.com/de/en/functions/operations/resilient-supply-chain-for-procurement.html
- 6 Essential Strategies to Maximize Supply Chain Resilience – Ware2Go – https://ware2go.co/articles/supply-chain-resilience/
- How to Improve Supply Chain Resilience | SafetyCulture – https://safetyculture.com/topics/supply-chain-resilience/
- How to Build Supply Chain Resilience Before the Next Disruption | Jabil – https://www.jabil.com/blog/successful-supply-chain-resilience-strategy.html
- Using Technology to Improve Supply-Chain Resilience – https://hbr.org/2023/09/using-technology-to-improve-supply-chain-resilience
- Leveraging Technology for Supply Chain Agility & Resilience – Supply Chain Planning.ie – https://supplychainplanning.ie/leveraging-technology-for-supply-chain-agility-resilience/
- Strengthening supply chain resilience during COVID‐19: A case study of JD.com – https://pmc.ncbi.nlm.nih.gov/articles/PMC8661997/
- Resilinc Announces Top 30 Most Resilient Suppliers in the High-Tech Industry for 2023 – https://www.resilinc.com/press-release/resilinc-announces-top-30-most-resilient-suppliers-in-the-high-tech-industry-for-2023/
- PDF – https://www.smisupplychain.com/wp-content/uploads/2022/09/rmm-2022.pdf
- Blog Series: The Ultimate Guide to Supply Chain Resiliency, Part 1 – Introduction – https://www.resilinc.com/blog/blog-series-the-ultimate-guide-to-supply-chain-resiliency-part-1-introduction/
- Supply Chain Management KPI Series: Supply Chain Resilience KPIs – https://www.linkedin.com/pulse/supply-chain-management-kpi-series-resilience-kpis-david-tang-eadse
- Enhancing Supply Chain Resiliency: An Industry Perspective – Dassault Systèmes blog – https://blog.3ds.com/brands/delmia/enhancing-supply-chain-resiliency-an-industry-perspective/
- Supply Chain Collaboration for Resilience – https://www2.deloitte.com/us/en/blog/business-operations-room-blog/2024/supply-chain-collaboration-for-resilience.html
- Future-proofing the supply chain – https://www.mckinsey.com/capabilities/operations/our-insights/future-proofing-the-supply-chain
- Restructuring the supply base: Prioritizing a resilient, yet efficient supply chain – https://www2.deloitte.com/us/en/insights/industry/manufacturing/global-supply-chain-resilience-amid-disruptions.html
- Metrics of Supply Chain Resilience: Focusing on Flexibility – About Resilience – https://www.aboutresilience.com/metrics-of-supply-chain-resilience/
- Identification and formation mechanism of key elements of supply chain resilience: Exploration based on grounded theory and verification of SEM – https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10621945/
