What is supply chain resilience and why does it matter?

What is supply chain resilience?

In the most minimalist sense, supply chain resilience is the ability to keep operating when disruptions happen. Companies need to identify their vulnerabilities – weak suppliers, transport bottlenecks, single points of failure – and take steps to protect against them. This means having backup plans, alternative sources, and enough flexibility to respond when problems arise. The aim is to maintain business continuity even when faced with unexpected supply chain issues. 

Developing and implementing a strategy tailored to the unique circumstances of a specific product, geography or logistics system isn’t a straightforward task. The right expertise, technologies, data – as well as strategic departmental alignment and close coordination with partners throughout the value chain - are all required.

Why does supply chain resilience matter?

Modern supply chains are fraught with potential vulnerabilities and complexity. According to McKinsey, the value of in intermediate goods traded worldwide has tripled to more than $10 trillion annually since 2000.  

As these global value chains have expanded, companies have sought to find ways to improve their margins - consequently, manufacturing operations have become leaner and supply chains have become optimised for cost savings and efficiency rather than resilience.  

This has proven testing for many. Covid-19 exposed gaps. Geopolitical tensions created new ones. Trade disputes and natural disasters keep throwing up fresh challenges. But, at the same time, opportunities have arisen. Indeed, supply chain resilience now represents for more than avoiding disruptions – it is a way to gain an edge over competitors and build stronger customer relationships. 

The core elements of resilient supply chains

• Flexibility and adaptability in sourcing and logistics 

Rigid procurement and logistics strategies have had flaws exposed. When crises hit, companies locked into single suppliers or fixed transport routes often struggle with delays and operational downtime. 

To overcome this, many firms are now spreading their supplier risk. Regional and domestic sourcing has become more attractive than relying solely on distant suppliers, even when the unit costs are higher. 

In fact, a survey conducted by the Boston Consulting Group showed that over 90% of manufacturing businesses now see nearshoring and reshoring as key ways of safeguarding their supply chains. 

By shortening complex or lengthy supply chains can be shortened, helping to reduce lead times and prevent potential exposure to global risks such as trade wars.  

• Visibility and transparency across the supply chain  

Companies can't respond to problems they can't see. Supply chain visibility matters because it gives early warning signs – you spot an issue with a supplier before it shuts down your production line, or identify a transport delay while there's still time to reroute. In turn, that same visibility enables firms to make key strategic decisions in areas such as inventory distribution. 

None of this works without the right technology. Manufacturers need platforms that bring together data from different parts of the chain – suppliers, logistics, production floors. The latest digital technologies enable this, helping the company understand its supply chain networks and work out where problems might emerge. 

Equally, data is crucial. In any digitalisation project, the key is not necessarily the actual digitalisation or the coding of any given solution, but equally the quality, relevancy and prevalence of crucial data. 

• Risk assessment and contingency planning  

The right tech can also play a key role in effective contingency planning. This process needs to begin with holistic supply chain risk management assessments that examine a variety of different exposures and potential crises, be it port closures, climate risks or production issues.  
Crisis teams need clear authority and defined responsibilities. When problems hit, these teams should follow playbooks that set out who does what and how the company responds to different scenarios. Without this structure, responses become chaotic and slow.  

• Collaboration with suppliers and partners

Supply chains are interconnected. A problem at a supplier three steps removed can still shut down your production line. That's why collaboration is a pre-requisite for building supply chain resilience. 

Partners need to share risk data and keep each other informed about stock levels and demand shifts. When disruptions happen, coordinated contingency plans mean the chain can adapt rather than break.  

New technologies can support this data sharing, as demonstrated by projects such as Connected MBEE – the ultra-secure defence testbed exploring supply chain collaboration as part of the Digital Supply Chain Hub. 

The benefits of supply chain resilience

From reducing downtime and mitigating financial losses to protecting reputation, enhancing customer satisfaction and capitalising on new opportunities owing to greater foresight and agility, supply chain resilience represents far more than mitigating risks. It can also provide significant competitive advantages.  

Using AI, machine learning, Internet of Things (IoT), 5G, blockchain, and predictive analytics technologies, companies can identify and take immediate action on critical data to optimise their business processes and address risk exposures while remediating issues that arise. Partnerships can also provide the foundations for the effective sharing of supply chain intelligence

The experience of recent supply chain disruptions has illustrated that supply chains are much more vulnerable than in the past. A company that has properly prepared with the right strategies will be able to enhance its supply chain flexibility, adaptability and operational resilience to better weather several different types of potential risk, shock, or bottleneck.