Supply Chain Resilience

I have friends who ordered some furniture from a well known and respected “stylish furnishings and home décor” company. How long did they have to wait? Six months! Seems outrageous, right? Why did it take so long?

Supply chain disruption.

Supply chain prioritization.

Supply chain breakdown.

2020 taught us many lessons. One of those is the fragility and brittleness of the supply chain. Just-in-time inventory is amazing until it’s no longer amazing. However, there’s no reason to throw the baby out with the bathwater. A hybrid solution is essential for supply chain resilience. In addition to a hybrid “just-in-time” (JIT) inventory system there are three other strategies to help build resilience.

  1. Inventory buffers – I’m not suggesting transitioning to a complete “just-in-case” (JIC) inventory but something between JIT and JIC. Yes, it’s more expensive to maintain inventory but if resilience is a strategic priority then a hybrid approach is a good idea.
  2. Network diversification – Do you have one manufacturer in one location? Do you have one supplier of raw materials? Do you have one warehouse location? Many times having a centralized location and one supplier may be the most efficient way of doing business it is not the most resilient. Perhaps, instead of looking at network diversification as an inefficiency, it should be looked at as strategic supply chain resilience.
  3. Geographic independence – How spread is your supply chain? A local or regional supply chain is likely more expensive but it is certainly more resilient.

In short, supply chain resilience needs to be a part of strategic planning. Resiliency should not be thought of as mutually exclusive with efficiency. Instead, supply chain resilience should be factored into effectiveness which is more important than pure efficiency.

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