04/14/2022
How to build a flexible supply chain that is resilient to change?
This article discusses some of the major challenges in logistics today, as well as the importance of building a flexible supply chain that is resilient to change.
Predictability and reliability in global logistics are increasingly under pressure. As supply chains are becoming longer and more complex, the likelihood of disruptions and delays is increasing. And those disruptions and delays can have major impacts on businesses, from huge financial losses to reputation damage. This article discusses some of the major challenges in logistics today, as well as the importance of building a flexible supply chain that is resilient to change.
Businesses have a vested interest in making their supply chains as predictable as possible. Knowing exactly when your goods are ready to depart the factory makes it possible to optimize their journey to their final destination. With efficient shipping routes and the best possible shipping rates. For most companies however, this kind of certainty appears more distant than ever.
Predictability under pressure
Supply chains are becoming increasingly less predictable and more volatile. Sea Intelligence reported that global schedule reliability dropped from 78.0% in 2019 to 63.9% in 2020 to just 35.8% in 2021. The drop between 2019 and 2020 can be easily explained. No one had anticipated a global pandemic, particularly of this magnitude. As COVID-19 spread across the world, it caused major disruptions, such as port shutdowns in China. But while COVID1-9 continued to wreak havoc across the globe in 2021, the major drop in schedule reliability to 35.8% shows that companies struggled to protect their supply chain against the now known risks associated with the pandemic.
Major events in 2020-2022
Let's recount some of the recent events that caused disruptions, delays, and congestion in global shipping. In March of 2021, the 20,000 TEU container ship Ever Given grounded laterally, blocking the Suez Canal in Egypt for six days, preventing an estimated US$9.6 billion worth of trade. COVID-19-induced shutdowns and delays resulted and continue to result in major port congestion around the globe. According to project44, the average shipment delay from China to the U.S. West Coast increased by 114% between 2020 and 2021. A lack of containers caused the rate of a 40ft container to surge by 79% compared to a year earlier (Drewry , February 17, 2021). Further inland, a large deficit of truck drivers is contributing to the supply chain disruptions.
How to build a flexible supply chain
The impact of these events can be devastating for business. But with the right mindset and tools, companies can overcome the challenges of today's volatile world. The first step to building a more flexible, and therefore more resilient supply chain, is to invest in visibility through a customized data platform that connects and integrates each step of your supply chain. End-to-end and in real time. Knowing what is going on throughout your supply chain, from the status of your orders to conditions at the port of arrival, enables you to predict potential disruptions in the flow of your goods. This gives you the flexibility to adapt and limit, possibly even avoid, any negative impact on your business.
Resilience through contingency planning
Visibility into your supply chain doesn't just support problem-solving on the spot. It also helps you detect vulnerabilities in your supply chain and formulate back-up plans. The events of the past years are evidence that disruption is inevitable. That's why we recommend applying a contingency mindset. It's the acceptance that things will go wrong and the resolve to always have a Plan B and even a Plan C ready to go. Contingency plans provide instant flexibility in the event of disruption. As you flag risks, thanks to data collected at each step of the supply chain, you are ready to respond.
As of 2021, it is estimated that more than half of companies lack end-to-end visibility into their supply chain. This lack of visibility makes them vulnerable to unexpected risks, such as the blockage of the Suez Canal. They are also less likely to detect emerging threats, including far more common problems like disruption at the port. While global logistics will always remain complex, visibility can make your supply chain more predictable, more flexible, and more resilient.