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16

Aug

5 Steps for Building a Resilient Supply Chain

Author: Rene Garcia

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Despite your best efforts, no supply chain will be without a disruption. Any one of your partners could experience operational delays, accidents, sourcing errors, or any other number of events that will affect your company. While you cannot control those situations, you can prepare for them, minimize their impact, and get your supply chain up and running again. Your preventative actions now will determine your supply chain resiliency going forward.

  1. Research Your Partners

    Like any relationship, knowing as much as you can about a potential long-term partner will help avoid headaches in the future. Knowing that they have the same goals in terms of safety, deliverability, and risk will bring stability to the entire supply chain. However, you cannot know these things unless you do the necessary research. Alternatively, you can partner with a service provider like Avetta to vet supply chain partners for you. Avetta helps reduce the cost and administrative burden associated with contractor prequalification, document management, auditing, employee-level qualification and training, insurance verification and risk management.

  2. Decide on Acceptable Risk

    Before making a decision on your supply chain partners, it’s important to know how much risk you are willing to expose yourself to and how much risk each supplier, vendor, and contractor adds to your risk profile. More importantly, decide on what your organization can do to reduce those risks. For instance, diversifying your supply chain can help mitigate the impact when a supplier is disrupted. As an example, if one supplier can’t deliver because of a natural disaster, then your organization can rely on a backup supplier until your primary supplier is operable again. Every supplier adds risk, but understanding the maturity of the supplier and their capability to manage threats will help you decide if the added risk is worth working with them.

  3. Be Honest in Alignment

    It’s easy for buyers and suppliers to be agreeable with each other’s demands when there’s a chance of doing business. However, being too agreeable sacrifices the acknowledgement of risks for the sake of the partnership. Similarly, taking hardline stances on demands can make a supplier hide risks so that they don’t lose the business. Instead, both parties should communicate openly and honestly, identifying risks along the way and discussing solutions to handle those risks. This kind of alignment will drive more positive outcomes when negative events occur.

  4. Budget for Risk

    When accepting bids from suppliers, understand that the lowest upfront cost is not always the best choice. Suppliers may be budgeting for risk in their bid. As such, discuss risk openly with suppliers, and identify potential threats so that you can decide if you’re over-paying for risk mitigation or if the supplier has factored risks into the bid at all.

  5. Keep Learning, Evolving, and Communicating

    No supply chain is perfect, and you will eventually experience a disruption. Don’t let these events be a complete negative – learn from them to make your supply chain more resilient. Document the cause of the disruption and how you and your partners responded. Learn where the weaknesses are and develop best practices to bolster those areas. Then share your findings with your supply chain. Just because you’re developing a plan doesn’t mean your partners are. Use the power of social knowledge to reduce the risk profile all along the supply chain.

Learn more about Supply Chain Risk Management and how Avetta Services can help you to reduce risk, improve safety performance and build a sustainable supply chain.

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