Although many businesses are prepared for minor setbacks, identifying the steps to take during a major disaster isn’t always easy. An international trade finance company can help reduce your exposure to the economic risks within your supply chain. Additionally, there are other ways to minimize the operational and financial impacts on your supply chain during a crisis.
1. Plan for Disruptions Ahead of Time
Setting up an effective supply chain contingency policy requires time and planning. During most catastrophes, you’ll have limited time to prepare. By creating a plan of action beforehand, you can reduce delays during an emergency and facilitate your ability to handle these situations effectively.
- Identify Risks – You need to consider the risks associated with common exposures, as well as those that are unpredictable.
- Create a Policy for Best Practices – Your contingency plan should be developed, managed, and synchronized across the entire supply chain. Optimally, your supply chains will be interconnected, sharing data, and strategically aligned.
- Prepare for Demand Volatility – During a crisis, demand for certain products and services becomes more volatile. Work with your suppliers to create a strategy for controlling fluctuations and meeting short-term influxes.
- Secure Alternative Financing – Cash flow shortages can cause significant disruptions during an emergency. Export factoring and supply chain financing provide advances that solve these short-term challenges.
Rather than trying to identify individual strategies for each risk scenario, try to focus on setting up holistic mitigation practices for the most substantial exposures.
2. Digitize Your Operations
Some documents, such as the “Bill of Lading”, require paper-based copies. However, many businesses have failed to recognize the advantages of digitizing the processes within their supply chain. Some companies are concerned about the security of digitization, while others don’t believe the efficiencies gained are sufficient to justify the expenses.
However, dependence on paper documents jeopardizes supply chain operations during emergencies. A robust digital infrastructure that enables e-signatures and other electronic transactions ensures that your business maintains visibility and can quickly react to changing circumstances.
Supply chain analytics is another digital investment that will help prepare your company for the worst-case scenario. This technology provides a real-time overview of inventory and predicts when items will run out of stock. By leveraging such proactive tools, you can restock products before they run out.
3. Maintain Transparency with Suppliers
Maintaining transparency and visibility with suppliers is an essential part of establishing a resilient supply chain. However, this step can also be the most challenging. To achieve full supply chain transparency, you have to identify each critical element of your production process.
Next, you need to know which suppliers are located in high-risk areas and identify alternative sources. For example, a company that produces automobiles may have to shut down production entirely if one or more of the individual components couldn’t be delivered. The following steps can help promote visibility and reduce the risks of sudden obstacles:
- Eliminate legacy system inefficiencies and automate redundant processes.
- Establish open lines of communication with all suppliers and networks.
- Manage lead times and inventory levels using a series of agreements with multi-tier suppliers. This strategy will offer early warning signals.
- Identify essential suppliers and make a recovery plan.
Consider using aggregated data from a third-party digital enterprise software vendor. This information will provide visibility into how your inventory is moving across the supply chain. In the event of a disruption, you can intervene immediately and begin identifying corrective measures.
4. Diversify Your Supplier Network
During the COVID-19 pandemic, many businesses learned about the risks of having suppliers from a single geographic area. When Chinese factories shut down, many companies could no longer source the components they required to continue production. As a result, many were forced to find last-minute alternatives or put their businesses on hold.
Diversifying your network of suppliers improves operational resiliency and ensures that core business functions can continue. In the event of a crisis, it’s unlikely that suppliers in different locations will be impacted in the same way.
You can diversify your supply network while still maintaining a close relationship with your existing suppliers. Always maintain a buffer of spare inventory to cover delivery delays during transitional periods.
The formation of a resilient supply chain requires thorough planning and preparation. However, this short-term investment of time and resources will significantly minimize the impact of unexpected events that could otherwise jeopardize your business.
In today’s volatile economy, you shouldn’t hesitate to prepare your supply chain for severe disruptions. Establish a business contingency plan, digitize operations, strive for transparency, and diversify your supplier network for the best chances of overcoming a crisis. To learn more about supply chain resiliency, contact the experts at Tradewind Finance, a leading international trade finance company, at email@example.com. Our licensed experts can answer any questions you have.
Compliments of Tradewind Finance – a member of the EACCNY.