Supply chain resilience boils down to a simple concept: How effectively does your supply chain weather any type of storm, be it natural disasters, geopolitical upheaval, or a world-wide pandemic? With all the turmoil we’ve seen in the past two years, I imagine that every one of us has had at least one instance of going to the store and wondering, “Why can’t I cross this item off my grocery list?”
By adopting agile supply chain resilience strategies, you can better prepare for supply chain volatility to ensure your products are available to your consumers when they want them. Before we dive into solutioning, let’s examine how we got here. For the past couple decades, there has been a strong movement in supply chain management to “go lean.” In other words, cut away any extraneous manufacturing, warehousing, inventory, and resources (human and otherwise) to operate a supply chain at the lowest cost possible while still serving customers at an acceptable level. This generally worked well, with only the occasional disruption from a natural disaster or other force majeure-type event. But enter a pandemic that, even two years after shutting down the world, is still disrupting supply chains and causing companies to struggle to resume business as usual. In those two years, we’ve learned that the typical lean supply chain just wasn’t resilient enough to weather such an intense, prolonged disruption.
While great for profitability during stable times, a too-lean supply chain can quickly crack under pressure. This leaves customers seeking alternate products, causing a lost sale, or choosing to replace a product category all together resulting in a lost customer. Do you remember the toilet paper panic in the early days of the COVID-19 pandemic? While stores saw widespread supply shortages, Amazon saw a spike in searches for “bidet.” In fact, this was the 20th most-searched term on Amazon in March of 2020, and many manufacturers saw a spike in demand. A bidet owner will naturally use less toilet paper (as much as 75% less, according to some studies), so those potential future sales are gone forever once the replacement product is purchased.
So, what do we do now? Companies must reassess their lean supply chains, review options for increasing resilience, and apply the lessons from the past few years into future supply chain planning. Let’s examine six different ways to approach supply chain resilience strategies with varying degrees of complexity:
1. Increase Inventory
Perhaps the simplest measure to address supply shortages is to just carry more inventory at each stage of your supply chain. Make more in your manufacturing plants, store more in your warehouses, and put more in your customer-facing stores. The obvious trade-off is increased costs, but there is always a cost-benefit analysis. We can use recent data to reevaluate where the breakpoints are for lost sales vs. inventory costs, since those have invariably changed since the start of the pandemic.