Stay ahead of supply chain disruptions by leveraging proactive strategies and data-driven insights.
Stay ahead of supply chain disruptions by leveraging proactive strategies and data-driven insights.
According to McKinsey Global Institute (MGI) studies, supply chain disruptions can curb 45% of a company's profitability over a decade.
Supply chain disruptions are becoming more common in today’s unpredictable world. From geopolitical events to natural disasters, unexpected incidents can severely impact your business. If you remember, the dockworkers strike in the U.S. longshoreman’s area caused a significant labor shortage, creating a recent global supply chain disruption and affecting critical material supply.
But what if you could predict these disturbances and prepare well ahead of time? Proactive supply chain disruption management can help you minimize the effects of these interruptions, guaranteeing business resilience and continuity.
Here, we'll take a look at some important strategies for handling supply chain disruptions in a way that makes use of modern technology, such as artificial intelligence and data analytics, to strengthen resilience.
Growing importance of preventive risk management
Modern supply chains are complex and work between many touchpoints, partners, and locations. One disturbance might spiral across the system and cause delayed delivery, manufacturing stoppages, and revenue loss. In this regard, preventive risk management in supply chains has become more imperative than ever. It prepares you to work on your supply chain resilience and contingency planning to handle possible risks and prevent them from derailing your supply chain operations.
Remember how the Red Sea crisis is disrupting the logistics industry? Pando’s advanced platform helped Accuride, one of our premium customers, to have digitized container visibility onto a single platform, decrease accessorial charges, especially demurrage, to support, and increase margins.
In short, working on proactive disruption mitigation strategies through an ideal transportation management system is your ideal bet to counter the disruption risks well ahead and lower financial losses and downtime.
Identifying potential disruptions: where to begin?
Finding possible interruptions is one of the initial stages in proactive risk management in supply chains. This calls for thorough awareness throughout the whole supply chain so that you can identify weak points that are vulnerable to disruption. It can be anything like a delivery failure of suppliers, a transporter strike, a labor shortage, severe natural calamity, and more.
The practical example is the Russia-Ukraine war, which has constrained the availability of crucial metals. As an example, a significant amount of critical materials, including 30% of platinum group metals, 13% of titanium, and 11% of nickel, which were formerly sourced from Russia, are now unavailable.
In this regard, here are some important considerations:
- Check your suppliers' consistency. Have they already encountered interruptions? What are their contingency planning and disruption mitigation strategies?
- Consider the potential consequences of geopolitical factors such as tariffs, political unrest, and international trade.
- Evaluate past weather records and disaster statistics for critical supply chain areas.
Strategies to build a disruption-proof supply chain
Supply chain interruptions can affect customer satisfaction, disrupt material flow, hinder manufacturing plans, and increase prices.
According to a study by The U.S. Chamber of Commerce, almost half (47%) of the SMEs (small and medium-sized businesses) now struggle to meet consumer demand because of supply chain interruptions.
Several factors can cause these disruptions, including natural disasters, geopolitical issues, economic downturns, and pandemics. The COVID-19 pandemic, in particular, exposed the interconnectedness of global supply chains and the need for proactive risk management strategies.
Using AI and data analytics for predictive modeling
Data analytics and artificial intelligence (AI) are transforming supply chain management and helping businesses to predict events before they occur. Generative AI tools are immensely leveraged in multi-modal transportation management systems to interpret enormous volumes of past data and evaluate social media trends, weather forecasts, and other unstructured data to project future supply chain bottlenecks. These insights, combined with predictive modeling, allow businesses to anticipate challenges and address them proactively.
The use of AI in freight procurement strategies helps in planning freight procurement strategies when it comes to the right carrier selection, contracts freight mode optimization, and more.
In this regard, AI-driven solutions like Pando provide real-time data insights that improve decision-making and help maintain a resilient supply chain, even in stressful situations.
Our clients appreciate the platform’s capabilities. As per peer review in Gartner, "Pando Transforms Visibility in Financial Auditing and Shipping"
Supply chain visibility and mapping
Future visibility across the supply chain is crucial for identifying roadblocks and managing risks effectively. According to a report by McKinsey & Company, real-time visibility solutions can reduce supply chain delays by 30%.
By leveraging technologies like AI, IoT, blockchain, and data analytics, you can gain up-to-date insights into transport execution. With real-time visibility, you can:
- Predict accurate ETAs
- Plan production schedules to prevent downtime
- Adjust incoming inventory for smooth assembly
- Move finished goods efficiently for on-time delivery
- Improve customer satisfaction
Inventory optimization
Maintaining excess inventory is not always possible, considering the financial restraints. Businesses can use inventory-optimizing strategies, though, to balance inventory levels with service levels. While reducing carrying costs, just-in-time inventory management, demand forecasting, and safety stock planning serve to cushion against supply chain interruptions.
Strong collaboration with carriers
Strong collaboration with your logistics partners, vendors, and other stakeholders with tools like AI-driven freight audit and payment (FAP), helps to build confidence and guarantees quick reactions during interruptions. In this regard, logistics companies with AI-driven TMS always stay updated on global regulations, international trade, and weather conditions. With their experience and insights on ETA, customs clearance, port congestion, and more, they can keep you updated on possible upcoming challenges and probable solutions for contingency planning.
Agile and versatile operations
Navigating through supply chain disruptions calls for both flexibility and versatility. In order to make prompt reactive responses to dynamic market conditions, companies need to practice agile and adaptive supply chain operations techniques. For instance, the use of data-driven predictive analytics detects threats early, while better contingency planning helps reduce transportation, logistics, and supplier management risks before they happen.
Scenario planning and stress testing
After identifying the potential risks, now it's time to evaluate your supply chain resilience. With the help of scenario planning and stress testing, you can simulate several disruptive situations and assess how your supply chain is responding. These exercises not only flag up your areas of weakness but also provide insightful analysis of where your operations should be strengthened and implement data-driven freight procurement strategies.
Stress testing, for example, can show how long it would take to find another supplier if a major one is located in a flood-prone location. Here, you want to enhance your contingency planning by creating adaptable backup plans that reduce the impact of disturbance.
Real-world illustrations of active strategies
Companies are well aware of the logistics disruption and are highly focused on risk management in supply chains. Here are some excellent examples of how big organizations are strategizing the challenges.
Toyota: The giant automaker, popular for its own "Just-in-time" inventory management process, changed its inventory stocking strategy after multilayer ceramic capacitor (MLCC) shortages. Toyota asked its suppliers to keep five months' worth of semiconductors in stock instead of three months. Because of this shift, Toyota was able to maintain its record-breaking profit levels and monthly output levels.
NIKE: Sportswear manufacturer Nike expedited a supply chain technology initiative in the early stages of the pandemic that utilized radio frequency identification (RFID) technology to monitor the flow of items through outsourced manufacturing facilities. Store closures across China were mitigated by the company's use of predictive-demand analytics.
The company successfully restricted the sales decreases in the region to just 5% by shifting inventory from in-store to digital sales channels and taking early action to prevent excess inventory accumulation across its network. Major competitors saw even steeper declines in sales within the same time frame.
One step ahead with Pando
Handling supply chain disruptions effectively is now a must for success in the logistics business. Organizations with resilient and proactive supply chains can mark their strong presence in today's disruptive market. From predictive modeling to real-time risk assessment, Pando provides the power you need to easily negotiate difficult supply chain disruption.
Explore our client success stories and blogs for more insights on how to achieve supply chain resilience and perform contingency planning.
Ready to overcome supply chain disruption for your business? Book a demo with us today!
