You’ve heard the saying, “It’s all connected?” Nowhere is that more true then when it comes to supply chains: they are the lifeblood of modern business, serving the often critical needs of customers. Whether it’s getting raw materials from distant suppliers or delivering a finished product to the end consumer, businesses rely on intricate supply networks that stretch across continents.
But global disruptions like pandemics, natural disasters, and geopolitical tensions (so many options!) make these networks increasingly at risk of failure. COVID certainly exposed the fragility of global supply chains, halting production and delaying shipments — leaving companies scrambling to adapt. Faced with this volatile landscape, building a resilient supply chain is a necessity. And with some strategic application, can also be something of a competitive advantage.
What’s your strategy for strengthening supply chains? What proactive approaches can a modern third-party logistics provider (3PL) implement to mitigate risks and ensure operational continuity?
The Importance of Supply Chain Resilience
Supply chain resilience refers to the ability of a supply network to withstand and recover from disruptions while maintaining continuous operations. Resilient supply chains are better equipped to handle unforeseen events that upend society and nature. The key is not just bouncing back after disruptions. Smart players will want to anticipate risks and prepare for them — so they can quickly adapt when the bad things happen.
Modern businesses face challenge after challenge that require a proactive approach to supply chain management. From unpredictable demand fluctuations and supplier failures to transportation delays and shifting regulatory requirements, the risks are numerous.
The McKinsey Global Institute reports that supply chain disruptions cost global companies an average of 45% of annual EBITDA every decade.
Key Strategies for Enhancing Supply Chain Resilience
Building resilience means adopting strategies that address vulnerabilities while optimizing efficiency.
Diversify Suppliers and Sourcing Locations
One of the most critical lessons from recent global disruptions is the danger of over-reliance on a single supplier or sourcing location. When a company’s entire production relies on materials from one region, any disruption in that region — whether it’s nature unleashing its worst, or political instability — can bring operations to a standstill.
A key strategy is to diversify suppliers and sourcing locations. By engaging multiple suppliers across different regions, companies reduce the risk of supply chain interruptions. Instead of sourcing raw materials exclusively from one country, a business can establish relationships with suppliers in several countries.
This way, if one supplier is affected by a disaster or unrest, the business can quickly switch to an alternative supplier. (Tesla sources parts from over 300 suppliers globally, ensuring it can maintain production even if one supplier faces a disruption.) According to McKinsey, companies that increase the geographic diversity of their suppliers can reduce supply chain disruptions by 30% to 50%.
Implement Digital Technologies for Visibility and Agility
Digital technologies are revolutionizing supply chain management by enhancing visibility, communication, and agility. Technologies such as blockchain, artificial intelligence (AI), and cloud computing provide real-time tracking and data analytics, helping businesses make informed decisions and quickly respond to disruptions.
Blockchain offers transparent, immutable records of every transaction in the supply chain, ensuring traceability and reducing fraud. In contrast, AI helps to predict demand fluctuations, identify potential risks, and optimize supply chain operations. AI algorithms can analyze market trends and consumer behavior, allowing businesses to adjust production plans accordingly.
Cloud computing facilitates real-time collaboration across different parts of the supply chain. Whether it’s sharing inventory data with suppliers or coordinating with logistics partners, cloud platforms make information accessible from anywhere, enabling quicker and more effective responses to disruptions. (Henkel uses AI to optimize energy-intensive processes, and cloud computing for real-time data sharing across its global operations.)
Deloittle found that companies using advanced digital tools such as AI and cloud-based solutions were able to respond to disruptions 50% faster than those without.
Build Redundancy into Supply Chains
Building redundancy into supply chains involves having backup suppliers, production facilities, and transportation routes to ensure operations continue smoothly even when a primary supplier or facility is disrupted. According to Harvard Business Review, businesses that built redundancy into their supply chains were 60% less likely to experience significant disruptions during COVID, compared to companies with no redundancy planning.
While redundancy adds costs, it acts as an insurance policy against disruptions. Manufacturing critical components in two locations ensures that production continues even if one facility is compromised by a natural disaster or political instability.
Strengthen Collaboration with Suppliers and Partners
Strong collaboration with suppliers and logistics partners is critical for supply chain resilience. In times of crisis, open communication and close coordination enable companies to adjust operations quickly and effectively.
Fostering long-term, strategic relationships with suppliers encourages information sharing and joint problem-solving. It can also be useful to develop a supplier code of conduct, so all parties follow the same standards and are aligned on risk management practices and priorities. This collaborative approach helps identify potential risks early and implement solutions before disruptions occur.
During the early months of COVID, Walmart strengthened collaboration with its suppliers by sharing real-time demand forecasts and inventory data. This helped suppliers to respond to sudden shifts in consumer behavior, and allowed Walmart to meet surges in demand for essential items. The result: 6% year-over-year revenue growth during the pandemic.
According to Deloitte, businesses that strengthen collaboration with suppliers see 22% higher operational performance and 23% faster response times to supply chain disruptions, compared to those that don’t .
Develop a Flexible Workforce and Operations
A flexible supply chain is one that can quickly adapt to changes in demand, production, and distribution. Flexibility involves cross-training employees, maintaining flexible production lines, and adopting modular designs that can be easily reconfigured to meet changing needs.
Cross-training employees ensures that workforce shortages don’t halt operations, as workers can switch roles as needed. Modular design allows companies to produce a wide range of products using standardized components. This reduces the need for specialized machinery and enables quick adjustments to production processes when demand changes or disruptions occur.
Adopt Sustainability and Compliance as Pillars of Resilience
More and more, sustainability is recognized as an essential part of supply chain resilience. A sustainable supply chain not only reduces environmental risks — it also strengthens long-term viability by meeting regulatory requirements and consumer expectations. Carbon Trust found that companies with sustainable supply chains reduce their operational risks by 35%, compared to those that put no priority on sustainability.
Sustainable practices such as reducing carbon emissions, optimizing resource use, and complying with environmental regulations enhance resilience. In particular, companies must ensure they comply with regulatory frameworks like the EU’s Deforestation-Free Regulation (EUDR), which requires due diligence on suppliers to prevent environmental degradation.
Role of a Modern 3PL in Enhancing Supply Chain Resilience
A modern third-party logistics (3PL) provider can play a critical role in helping businesses build resilient supply chains. With their expertise in logistics and supply chain management, 3PLs can implement advanced technologies, manage inventory, optimize transportation, and provide real-time visibility across the supply chain. While a business focuses on its core competency, the right 3PL offers a platform of proactivity:
1. Real-time Monitoring and Predictive Analytics: 3PLs can use advanced analytics to monitor supply chain performance and identify potential disruptions before they escalate.
2. Sustainability Initiatives: 3PLs can help businesses meet their sustainability goals by optimizing transportation routes to reduce carbon emissions and adopting eco-friendly packaging solutions.
3. Risk Management and Contingency Planning: A 3PL can help businesses develop and implement comprehensive risk management strategies, including backup suppliers and alternative transportation routes.
4. Digital Solutions for Enhanced Visibility: By leveraging cloud-based platforms and AI-powered tools, 3PLs offer businesses greater visibility into inventory levels, shipment status, and supplier performance.
A Resilient Supply Chain Is Key to Future Success
In an era marked by global disruptions, businesses that build resilient supply chains are better equipped to thrive. By diversifying suppliers, adopting digital technologies, and embracing sustainability, companies can protect themselves from unforeseen risks and ensure operational continuity. A forward-thinking 3PL like NBD combines its expertise with cutting-edge solutions, such as our real-time monitoring and predictive analytics — making us invaluable partners for a resilient supply chain.
Our tools and strategies are proven across 40 years of fulfillment, adjusting and evolving to overcome the latest challenge that looks to muck up the global supply networks. In a proactive partnership, we can be sure your business will not only survive disruptions — you’ll be ready to emerge stronger and more competitive.
