By Bharat Ahir, CEO of Two Eight One (www.twoeightone.co.uk) and based in Hong Kong, Bharat has 30 years experience in global sourcing and a track record of delivering supply chain solutions and expertise for brands and retailers.
The pandemic well and truly revealed the fragility of the just-in-time approach to supply chain management. A model that had been working for the 21st century suddenly appeared broken. Port closures, closed borders and lockdowns around the world showed how easy it was to disrupt a way of life that suppliers and their customers had taken for granted. Staffing levels, transport and warehousing all suffered. Consumers began to notice products missing from the shelves and manufacturers were waiting for longer for parts.
As a result, companies across the supply chain had to rethink their priorities – resilience became the name of the game. What this means in practice is that companies need to sacrifice some flexibility and a transactional approach to supply chain management in favour of building strategic long-term partnerships that are mutually beneficial and create stronger links.
A key benefit of this approach is the ability to undertake collaborative planning with all stakeholders, from the factories you use to the people who move your products. This will pay dividends in times of crisis in contrast to a transactional approach that relies on a variety of companies where you are all trying to respond to the unexpected as it happens. The deeper your relationships, the more you will know about your partners and their capabilities and requirements, where the gaps are, and how they can be filled.
There is also a knock-on effect on the financial approach to your partners, which gives you greater predictability and long-term benefits. Instead of having multiple deposits with various suppliers, transporters and storage facilities, you have strong partnerships that you can rely on to manage disruption effectively and a single line of commitment for each segment of the supply chain.
It’s a myth that the shift to resilience from just-in-time means sacrificing flexibility. Forming enduring relationships enables suppliers to get to know you well, including your needs and associated fluctuations. This means understanding when and how you need flexibility within the partnership, based on a predictable demand plan. Factories can plan for your raw material needs and what room for manoeuvre you might need at the margins, with associated cash management benefits. You get a greater scope of flexibility from one supplier, rather than limited flexibility from many.
A critical element of making these partnerships work is visibility and control, which are in fact made easier by having a limited number of partners versus a wide spread of stakeholders in each segment. Digital management of the supply chain brings transparency and visibility at every stage of the process; increased data sharing, deeper analysis, actionable insights and improved efficiency enable companies to more effectively manage their bottom line.
Committed partnerships mean mutual understanding and a dedication to addressing problems swiftly and with long-term solutions rather than short-term fixes. By identifying problems rapidly and at an early stage through digital supply chain management, or anticipating them in advance, risk management and mitigation is far more secure.
Resilience in supply chains means building stronger links across the chain from beginning to end. A chain is only as strong as its weakest link. A commitment to long-term partnerships builds a strength that is lacking in the short-term transactional approach that characterises the just-in-time model. Only by deepening relationships and using digital supply chain management to reinforce operational resilience can we mitigate the kind of disruption we saw during the pandemic when the next global crisis hits.