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What is supply chain resilience?
The ability of a supply chain to withstand and recover from disruptions, caused by internal or caused by internal or external factors resilience. It’s essentially proactive supply chain risk management, often focused on building robust processes designed to ensure operational continuity in the face of unexpected events.
Resilient supply chains have lots of similarities with agile supply chains, which also prioritize the ability to respond quickly to dynamic, challenging circumstances to ensure continuity.
The key difference is that while resilient supply chains will generally be agile, agile supply chains aren’t always resilient. In other words, agile supply chains rely on agility for protection, pre-empting, and avoiding disruptions. Resilient supply chains are built to be able to bounce back quickly even if the disruption isn’t avoided.
Both resilient and agile supply chains are the opposite of lean supply chains, which sacrifice protection against potential disruption in favor of cost-effectiveness and speed.
Key components of a resilient supply chain
Resilient supply chains can take many forms, depending on the specifics of the diverse businesses that use them. However, most tend to be based around core shared components, which include:
Effective forecasting capabilities
The ability to anticipate changes in the business or economic landscape ahead of time is an important part of supply chain resilience. Effective forecasting capabilities allow businesses to prepare for potential disruptions before they happen, ensuring their supply chain can continue to thrive.
Supply chain forecasting can involve predicting demand or supply. The former provides insights into whether supply chain operations need to be increased to meet elevated demand or decreased to save on costs, while the latter anticipates problems that can limit the supply chain’s throughput and affect fulfilment rates.
A diversified supplier base
Since supply chain resilience is primarily concerned with supply chain continuity, diversification of suppliers is an important element. It can be carried out to varying degrees, from dual-sourcing essential raw materials from multiple suppliers (the single most popular supply chain resilience strategy) to diversifying suppliers across different regions or countries.
On a basic level, this practice ensures that a single supplier failing won’t drastically inhibit the supply chain’s effectiveness. On a more dramatic level, it ensures that a geopolitical event like a natural disaster doesn’t completely wipe out the supply chain’s ability to perform.
Effective inventory optimization
There are lots of different inventory management methods companies can choose to use, all offering different pros and cons. However, for businesses building a resilient supply chain, conservative inventory management techniques are generally favored over lean approaches like “just-in-time” inventory management.
While the exact approach used will vary depending on the specific business, this might involve holding safety stocks to prevent stock-outs or having long lead times for deliveries to avoid delays to production.
High supply chain visibility
Visibility over supply chain networks can help businesses understand where transitions work smoothly and where the chain falls short. This is important in building a resilient supply chain, as resilience relies in part on seamless processes to manage the movement of materials and goods from supplier to buyer throughout the entire supply chain.
Supply chain visibility can be improved with supply chain management software, which increases transparency throughout the chain and makes it easier to spot bottlenecks or reoccurring issues. Incidentally, increasing supply chain visibility also makes tracking progress towards supply chain KPIs easier.
Comprehensive contingency plans
Resilient supply chains don’t just rely on methods to avoid or weather risks that can cause disruption; they also involve pre-composed contingency plans that mean the supply chain can bounce back from disruption quicker than a non-resilient supply chain.
Creating these plans requires a serious approach to supply chain risk assessment. Periodically, a formal risk assessment process is conducted to identify risks and devise strategies to counter them.
Benefits of a resilient supply chain
Building a more resilient supply chain is a priority for diverse businesses because of its varied benefits, including:
Improved continuity: The key benefit of a resilient supply chain is that it allows businesses to continue functioning through disruptions that affect leaner, more fragile chains. In other words, businesses with resilient supply chains can weather storms that might be existential to others.
Improved agility: The relationship between supply chain resilience and agility means that resilient supply chains are almost always agile. This allows businesses to adjust their supply chain management strategy quickly, adapting to changes in the broader market to preserve healthy operations.
Higher fulfillment rates: Resilient supply chains are far less likely to suffer from disruptions that can lead to stock-outs, such as key suppliers needing help to fulfill their obligations. This means businesses that use them tend to maintain higher order fulfillment rates over the long term.
Stronger supplier relationships: A lot of the work involved with creating a resilient supply chain can be boiled down to improving and broadening supplier relationships. This can have related positive effects, including the chance to secure better terms that can increase cash flow and create a competitive advantage.
The growing importance of supply chain resilience
While supply chain resilience is not a new concept and has been a popular approach to supply chain management for decades, an increasingly turbulent global economic landscape has raised its profile in recent years.
In our recent Supplier Survey, we asked over 11,000 businesses what their biggest concerns were for 2024. 22% of them said that supply chain disruption was their biggest concern, highlighting how businesses are focused on threats to their continuity.
Going into 2023, we found that 84% of business leaders had revised their sourcing strategies in the previous year to mitigate any future disruption.
Improving supply chain resilience is a priority for supply chain leaders keen to stay ahead of the pack. Diverse methods are available to do it, including reviewing the approach taken to supplier management, adopting a better-suited style of inventory management, and fully taking advantage of supply chain finance solutions to shore up balance sheets.
FAQs
Flexible Funding 2.0 is designed to help you meet your short-term cash objectives. Use Flexible Funding when you need to:
• Make DPO or CCE improvements for financial reporting
• Free up cash for an unplanned initiative (not forecasted)
• Avoid running short on cash payment accounts (due to early payment demand)
• Leverage a low-risk investment option for idle cash
• Maneuver as market conditions shift
• Improve supplier relationships with access to reliable cash flow
Generally speaking, no. Flexible Funding offers a blended experience of Taulia’s Supply Chain Finance and Dynamic Discounting solutions. Whereas Supply Chain Finance permits one early payment offer per day, Dynamic Discounting presents multiple offers on a sliding scale the user can review on a digital calendar. Selecting fixed or variable-rate financing with Dynamic Discounting will influence whether suppliers receive one or multiple offers per day in certain situations when Flexible Funding is activated. Consistent pricing between funding sources — structured in advance through collaboration by all parties — also ensures a unified experience for suppliers.
Rate parity concerns the consistent cost of supplier financing between funding sources. Traditionally, companies have sought to maximize their yield on dynamic discounting while insisting banks keep their margins thin on accelerated payments for suppliers. This rate disparity incentivizes suppliers to “shop” for the best price when both funding sources co-exist in a Flexible Funding-enabled program. A better approach is fair and consistent pricing between funding sources so that suppliers feel like they get a good deal on needed liquidity and buyers optimize the return on their investment with high supplier participation.
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