In an era of interconnected markets, organizations often face complex challenges in managing their supply chains. Disruptions caused by natural disasters have underscored the importance of developing resilient supply chains. Strategic procurement involves the planning and execution of sourcing to create resilient and agile supply chains. It travels beyond transactional buying while focusing on long-term value creation, and innovation. Keep reading to explore the key strategies to build resilient supply chains.
Strategies for building resilient supply chains
Supplier relationship management (SRM)
Strong relationships with suppliers are essential to a resilient supply chain. Strategic procurement emphasizes effective SRM practices, including collaboration and mutual trust. Developing partnerships fosters open dialogue, helping organizations gain improved visibility into supplier networks while enhancing overall supply chain resilience.
Inventory and capacity buffers
Increasing buffer capacity is the simplest method to improve resilience, whether it takes the form of underutilized production facilities or inventory that exceeds the needs for safety stock. Buffers are costly; therefore, supply chain leaders may find it difficult to convince the C-suite of their necessity. For the introduction of new products or the development of new growth markets, top corporations deploy buffers in the form of surge capacity. Additionally, by carefully utilizing contract manufacturers for their surge needs, organizations can build buffer capacity.
Major natural disasters that struck Japan and Thailand in 2011 severely interrupted global supply chains and exposed businesses’ reliance on solitary sources of supply. Due to missing, frequently low-cost components, virtually finished cars in the automotive sector could not be delivered to clients. It should be clear that multisource can help reduce this risk. Supply chain leaders need to have a thorough understanding of their supplier networks to develop a multisource strategy. They also need to be able to classify suppliers not only by spending but also by how a disruptive event may affect their revenue. By giving contracts to more suppliers or working with an existing sole- or single-source supplier who can produce from many places, diversification can be accomplished.
Beyond multisource, several businesses also wish to shorten the cycle times for finished goods and lessen regional dependence in their worldwide networks. Regional or local supply chains can be more expensive because they increase the ecosystem’s complexity and number of participants, but they also enable greater inventory control and bring the product closer to the customer.
Platform, product, or harmonization
For items to travel effortlessly throughout the network, plant technology must be more synchronized the more regionalized the network is. One well-known example of this harmonization in the automotive sector is the adoption of standard vehicle platforms for a range of models. Another method of harmonization is to standardize parts across many products, especially those that are not obvious to or significant to the client. This facilitates the placement of larger volumes among various providers and makes sourcing policies simpler, both of which increase resilience.
Building resilient supply chains is crucial for organizations to navigate the challenges of the modern business landscape. Get in touch with a procurement company to proactively address and drive innovation in your business.