Tips for Building Resilient Supply Chains Amid Rising Disruptions

Should we stop seeing disruptions as rare exceptions and start recognizing them as fundamental business challenges? Whether driven by economic shifts, geopolitical tensions, or social movements, labor disruptions are increasing in frequency and complexity.

No matter what industry you move in, these disruptions aren’t just operational headaches; they’re risks that can hit your bottom line, drive up costs, and affect your competitive edge. According to a survey, 70% of CPOs struggled to attract and retain the right talent for critical supply chain roles as a result of labor disruptions, highlighting the widespread impact of labor disruptions on organizational capability.

Preparing for Supplier Disruptions

There were 8,197 supply chain disruptions in the first half of 2023, an alarming number that highlights just how common these events are becoming. From Hurricane Helene to longshoreman strikes, wildfires, and train derailments, disruptions are increasingly a part of “business as usual.”

So, how do you effectively mitigate these risks? The answer is to develop strategies that address supplier disruptions systematically rather than reactively.

One of our clients, a leading financial services technology company, faced a potential UPS Teamsters strike that could severely disrupt its operations. Like many businesses, it relied heavily on UPS for critical shipments. The Teamsters, the backbone of UPS’s operations, belong to one of the largest labor unions nationwide. As the contract deadline approached, our client found themselves in a vulnerable position.

Anticipating the potential impact of a strike, we worked with the client for three months to craft a contingency strategy tailored to multiple scenarios.

The approach was practical: minimal intervention for disruptions lasting less than three days and a more comprehensive response for disruptions lasting a week or longer. We collaborated closely with their IT teams and explored alternative options, such as delegating a portion of their shipments to the U.S. Postal Service. While it wasn’t possible to cover 100% of the business volume, we built capabilities to ensure their most essential deliveries would stay on track.

In the end, the strike was averted a week before the contract expiration. But the effort wasn’t wasted. Our client walked away with enhanced IT capabilities and a more flexible distribution system, ready to tackle future disruptions.

Building Resilience into Your Distribution Network

The real takeaway is that resilience isn’t just about surviving disruptions—it’s about systematic preparation and adaptable processes.

While solutions must be tailored to specific organizational needs, there are several key principles behind resilience building:

1. Comprehensive Risk Assessment: Conducting a thorough risk assessment is the first step in creating a supply chain system that can bend without breaking. Protect your core offer by removing time spent managing low-demand items, or use a tool like a Disruption Decision Matrix to help prioritize your mitigation efforts and identify potential risks.
2. Actionable Contingency Planning: Developing actionable contingency plans tailored to various disruption scenarios is crucial. Organizations that prioritize workforce resilience, in particular, see an 11% to 55% increase in performance. By outlining specific responses for different lengths of disruptions, businesses can ensure they act quickly and effectively when challenges arise.
3. Balancing Cost Efficiency with Risk Mitigation: One of the toughest challenges leaders face is balancing the need for resilience with the pressure to keep costs low. However, simply cutting costs can cost more than money in the long run. Implementing cost optimization strategies using data can improve operational efficiency, allowing reinvestment in resilience measures that support growth and innovation even in the most challenging times.
4. Enhancing Upstream Visibility: Disruptions are rarely isolated events. Having a clear, real-time view of your supply chain from A to Z allows you to better position yourself to reduce inventory losses, identify and minimize inefficiencies, and streamline operations.

Shifting from Reactive to Adaptive

While disruptions like the potential UPS strike or the ongoing Red Sea crisis can’t be prevented, companies that take a holistic, data-driven approach to risk mitigation are far better positioned to respond effectively and maintain business continuity. The key is moving from reactive contingency planning to integrating risk mitigation into every layer of your operations, ensuring critical resources can pivot seamlessly.

One way to free up resources to enable this is to uncover hidden savings in overlooked areas throughout your supply chain, such as indirect spending. Areas like facilities management, marketing, and logistics are often overlooked, leaving room for significant cost-saving opportunities.

By strategically reducing costs in these areas, you’ll free up the funds necessary to strengthen your supply chain resilience. Whether you invest in better technology, diversify your supply base, or build inventory buffers, you’ll set up your operations for success, even in the most unpredictable times.