The Need for Supply Chain Resiliency

Supply Chain Analytics
 & Santoshkumar Vaddi

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During the COVID-19 pandemic, several supply chain terminologies — such as supply chain resilience, responsiveness, disruptions, visibility, supply, demand, adaptability, logistics, container congestion, agility, etc. — were in vogue. Of these terms, “supply chain resiliency” was perhaps the most widely discussed term in the wake of disruption caused to the supply chain during the pandemic. This blog discusses the importance of supply chain resiliency among firms and ways to improve it.

What Is Supply Chain Resiliency? 

It is defined as the firm’s capability to withstand, adapt, and recover from external disruptions and whether it will meet the customers’ demands and ensure that targets are met. A disruption in a particular node will create a ripple effect that affects the other nodes in the supply chain. When we deep dive into the supply chain operations and performances during the pandemic, resilience assets such as risk mitigation inventories, subcontracting capacities, backup supply, transportation infrastructures, etc., have not helped firms avoid disruption. 

 The reason is that general supply chain firms design their resilience assets for short-term disruptions such as political and economic shocks, terrorist attacks, natural disasters, labor strikes, etc. For example, in the automotive industry, many processes are organized at the eleventh hour, and inventory is available for about 30 days at maximum. Moreover, the locations of suppliers and factories in different regions are subject to varied timings. Therefore, this backup plan can sustain only small risks.

The pandemic was a new type of disruption that created unprecedented vulnerabilities in lead times and ordered quantities, network structure disruptions, and demand fluctuations. With the pandemic lasting longer than anticipated, unpredictable scaling and supply, demand, logistics, and infrastructure disruptions occurred simultaneously. Agile capacities have enabled firms to repurpose their supply chains. 

Many firms have repurposed their supply chain structure to manufacture critically needed items during the pandemic. For example, a few firms repurposed their perfume and hair gel factories to produce hand sanitizers; some altered their designer clothing factories to make masks, gloves, and non-surgical gowns. Similarly, many automotive giants shifted their production from cars to highly proprietary ventilators and hospital beds by collaborating with local manufacturers. Analysis reveals that adaptation capabilities are crucial in managing disruptions in supply chains during the pandemic.

Now, let us focus on modeling techniques that aid firms in decision-making during the pandemic and potential future enhancements. A pandemic generally goes through several stages — anticipation, early detection, containment, control and mitigation, and elimination. The effects and scope of disruption vary and increasingly worsen at each level. Firms should plan the following aspects during this time:

  • Network optimization: They should have a backup plan with alternate network structures that lessen the impact on supply chain elements during disruption, such as identifying crucial suppliers and facilities and modifying supply chain designs to account for environmental factors.
  • Process optimization: These include optimal reconfiguration of material flows, analysis of ripple effect on current processes, optimal reallocation of supply and demand conditions, etc., based on disruption propagation scenarios. 
  • Control-level simulations: These should be performed on various policies, such as inventory and production policies, which are more vulnerable to the pandemic.

Strengthening Supply Chain Resiliency

As discussed in the section above, achieving optimization with a traditional supply chain can be complicated. This is because of many reasons, such as data silos, lack of ground-level coordination, lack of end-to-end visibility, lack of data, etc. Some of the future enhancements that every supply chain firm should focus on to improve supply chain resilience are:

  • Core supply chain analytics technology — ConnectedView solution
  • Viable supply chain
  • Reconfigurable supply chain 

The second and the third options majorly depend on the type of industry the supply chain firm operates in and the type of disruptions as well as rides on the adaptation capabilities of the firms. For example, many firms repurposed their supply chain structure during the pandemic to manufacture urgently needed items. The disruption imposed restrictions on one product, generating a demand for a viable alternative product. 

The first option, ConnectedView, is an AI-powered supply chain performance improvement solution that empowers supply chain personas with better and faster decision-making through its core pillars — Connected Planning, Connected Visibility, and Connected Optimization. It allows companies to track and analyze data in real time, establish data connections across different data points, identify cause-and-effect impacts on various supply chain nodes, and make accurate decisions to improve efficiency and reduce costs. The pillars of ConnectedView add value in the following ways:

 ·         Connected Planning: AI/ML-based associative demand forecasting, sensing, and planning for higher visibility to expected variability

·         Connected Visibility: An end-to-end visibility solution to detect risks and anomalies and recognize causes and orchestrate responses for better customer service

·         Connected Optimization: AI-powered optimization and recommendation point solutions across network optimization, multi-echelon inventory optimization (MEIO), warehousing, and transportation

Conclusion

The COVID-19 pandemic has affected the supply chains worldwide, with disruptions in one part of the globe affecting firms elsewhere. The need of the hour is a resilient supply chain as it can mitigate risks, increase agility, enhance customer satisfaction, and deliver on financial performance. Firms with a robust, resilient supply chain will be able to succeed in today’s volatile and unpredictable business climate. 

References:

(PDF) Supply Chain Resilience Theory and COVID-19 Pandemic: What we know, where we failed, and how to progress (Plenary Talk at INFORMS ICSS 2020) (researchgate.net)

RIPPLE EFFECT IN THE SUPPLY CHAIN | Dmitry Ivanov | 15 updates | 4 publications | Research Project (researchgate.net)

(PDF) OR-methods for coping with the ripple effect in supply chains during COVID-19 pandemic: Managerial insights and research implications (researchgate.net)

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