3 MIN. READ
Building a more resilient supply chain protects businesses from a wide range of scenarios. So, if there is one thing to learn from the past year, it's that risk management should be a priority for building a strong supply chain.
A Challenging Environment
Things were slow for many manufacturers in 2020 and it may take a while for some sectors to recover, especially those grappling with suppy shortages and high prices.
Supply chain managers are facing additional obstacles as well. COVID-19 revealed a lack of visibility over some supply chains. Longer lead times are also a challenge for those looking to buy new products.
Now, it is time for businesses to review the challenges that they faced this past year. Learning from this experience will lead to better supply chain risk management.
Cultivating Strong Relationships With Suppliers
Organizations should treat their suppliers like partners. Beyond pricing, it is important to ask if a supplier is a good match and will help with future growth. This approach will pay off since companies that innovate with their suppliers see a growth of almost 5% in earnings each year.
Communication is important. Paying invoices on time can improve relationships with suppliers. Businesses should also review and update agreements to create strong relationships.
The Benefits of Local Sourcing
Local sourcing is a resilient supply chain practice that has been gaining traction in manufacturing for years. There are several benefits to consider with this strategic move:
• There are no shipping delays.
• Shipping costs are low.
• It protects businesses from changes in import tariffs.
• The carbon footprint is minimal.
• Local producers can adjust their output to match the demand.
• It guarantees freshness and can improve customer satisfaction.
• Spending money locally creates strong communities.
There are many resources for locating and vetting local suppliers. For instance, industrial compiler and publisher MNI began offering free digital downloads of the Industry Section of its state directories in 2021. Companies searching for suppliers in their state can download a copy of their state's manufacturing directory for free. IndustryNet, the industrial marketplace powered by MNI data, helps businesses find new vendors and get competitive quotes to expand their supplier portfolio.
Mitigating Risks with Multiple Sources
There are situations where working with multiple vendors can be complex. For instance, 89 different vendors access an average company's IT networks every week.
However, using different sources reduces dependency. The key is to find the right balance between working with a larger portfolio of vendors and keeping things manageable.
Creating a directory of vendors who are vetted can help with choosing another option quickly. Ideally, businesses should have a list of pre-approved alternatives if a product is out of stock.
It is also important to assess the risks tied to each vendor to create a diversified portfolio. For instance, working with vendors in two different geographic areas ensures that a natural disaster won’t incapacitate both.
Leveraging Technology to Build a More Resilient Supply Chain
The right tech tools can improve visibility and reactivity. The following tools are worth considering, even though some features might overlap:
• Supply chain management software allows users to track orders and payments. Some products have planning capabilities as well.
• Procurement management software is a must-have tool for businesses that need a central platform for managing purchase orders and vendor contracts.
• Inventory forecasting products can use data to predict what to buy next.
• A vendor management system is a useful resource for managing contracts and tracking vendor performance.
Wrap Up
While some risks are difficult to predict, it is possible to mitigate their effects by building strong relationships with suppliers. Using a wider range of sources, local and otherwise, can also reduce risks. Plus, utilizing technology can lead to a more transparent and effective procurement process, resulting in a more resilient supply chain in the end.
