Peak Planning

Top Four Strategies for Supply Chain Resilience

Peak Planning
July 14, 2022
9 min read

Build a resilient supply chain that meets customer expectations and propels your business forward in the face of disruption.

Table of Contents

Supply Chain Resilience Has Always Mattered

Find Asset-Light Solutions

Prioritize Flexibility

Create Diversity

Inventory Management

Supply Chain Resilience Simplified

Benefits of Supply Chain Resilience

Supply chain resilience is the key to longevity in today’s market where supply chain disruptions span across industries. The pandemic may have thrown supply chain challenges into focus, but they have, in fact, always been part of doing business. According to a report by McKinsey, we now experience supply chain disruptions lasting longer than a month every 3.7 years.

Businesses with resilient supply chains succeeded through the most recent challenges, and  small to mid-sized businesses (SMBs) in particular have an opportunity to reimagine their supply chain as a growth-driver in the face of market shifts and inevitable disruption.

Ahead we’ll outline the top four strategies for creating a more resilient supply chain.

1. Find Asset-Light Solutions

Amazon’s decision to sublet 10 million square feet of excess warehouse space when their sales slowed in 2022 highlights how quickly changes in consumer demand can affect supply chain operations. Choosing an asset-light supply chain solution frees up capital for you to make quick decisions around product development, customer experience, or marketing spend.

Children’s furniture brand, ECR4Kids, had a fully in-house fulfillment solution. They owned and operated three warehouses in the US, which served their primarily business to business (B2B) customers well. However, when they branched into direct to consumer (D2C) sales, they found that their in-house solution was unable to keep up with the demands of marketplace sales, so they decided to outsource D2C fulfillment.

After outsourcing a single portion of their business, they saw how much capital and internal bandwidth they could free up in their company with a fully outsourced solution. They quickly decided to exit all of their owned warehouses and pivot all of their fulfillment to their warehousing partner.

Ultimately, their decision to outsource their fulfillment saved them nearly $700,000 per year in warehousing and fulfillment costs.

2. Prioritize Flexibility

Flexibility is the key to resilience, and it can be built into every link of the supply chain. It relies on strong partnerships and scalable technology.

Flexible Warehouse Agreements

Long-term storage agreements with guaranteed volume leave you two options: limit sales potential based on the storage space you can afford or lock in rates at peak volume and diminish the profitability of sales. A flexible warehousing and fulfillment partner will allow you to scale your warehouse space and labor based on demand.

LS2 Helmets, America’s fastest growing motorcycle helmet brand, saw that the cost of expanding their traditional fulfillment solution into new markets was prohibiting their growth. As they researched their options, they found that a partnership with an on-demand warehousing partner would allow them to pay only for the space they needed when they needed it. This flexibility mitigated the risk of expanding into new markets and fueled their growth.

Transportation Flexibility

Consumers have endless options when it comes to where and how they shop. Their preferences have swung from brick and mortar to ecommerce and back again as shoppers navigate their ever-growing options.

Even B2B purchasing has changed as more corporate buyers shift to ecommerce channels. Infact, McKinsey reports, “Not only are corporate buyers open to e-commerce, two-thirds now rely on digital and remote channels throughout their purchasing journey.” 

These shifts in purchasing patterns mean that merchants can no longer segment their supply chain between B2B and D2C channels. A resilient supply chain will have the flexibility to fulfill all order types from multiple sales channels through a single platform – seamlessly pivoting between LTL, FTL, and small parcel as needed.

Supply Chain Resilience in Action

Athletic recovery drink, O2, credits their flexible fulfillment solution with their ability to pivot and thrive during COVID-19 shutdowns. Prior to the pandemic, their primary sales channel was retail sales in gyms. When gyms were shut down in 2020, that sales channel was effectively closed. They had to act quickly to direct their customers to their online channels.

Because they had a flexible fulfillment solution that could seamlessly pivot from B2B to D2C order fulfillment, the abrupt change in their order profile did not slow down their operations a bit. In fact, in a time when many businesses struggled to stay afloat, O2 grew their business by 5x overall.

3. Create Diversity

Having a diverse network of partners gives you peace of mind that if one channel is shuttered, another one can be switched on without missing a beat.

Supplier Diversity

For years, many merchants have relied on single manufacturers, but the regular factor shutdowns in China and Vietnam highlight the need for a multi-threaded approach to procurement. For some merchants that may mean negotiating contracts with multiple overseas suppliers. For others it could mean nearshoring.

Network Diversity

Freight delays and port congestion most recently highlighted the need for alternate shipping lanes and ports of entry. Network diversity can even be beneficial at a warehouse level. Inclement weather, mass power outages, or other service disruptions can shut down entire warehouses and regions. Having a distributed warehousing network allows you to re-direct orders if any single warehouse is shut down.

4. Inventory Management

Supply chain shortages early in the pandemic caused many retailers to swing from a Just in Time (JIT) procurement model to a Just in Case (JIC) model. In fact, many businesses ended up with a glut of inventory, leading to deep discounts from major retailers Target.

A resilient supply chain is one that prioritizes sales velocity and profitability in inventory management. For many merchants, this means narrowing down their SKU catalog to focus on the top revenue drivers for their business. This helps build resilience into the supply chain by:

  • Increasing Margins: Removing slow-moving SKUs increases profitability and promotes sustainable growth for your business.
  • Decreasing storage costs: Fewer SKUs take up less space in the warehouse so you can carry your best sellers in higher volumes.
  • Simplifying inventory distribution: A smaller warehouse footprint makes it easier to distribute inventory to lower your final mile time in transit (TNT) and meet customer expectations for delivery.

Supply Chain Resilience FAQs

What is the biggest threat to supply chain resilience?

The biggest threat to supply chain resilience can vary depending on numerous factors such as industry, geography, and the specific characteristics of the supply chain itself. However, some common threats include natural disasters, geopolitical instability, cyber-attacks, pandemics, and disruptions in transportation or logistics networks.

What is supply chain resilience?

Supply chain resilience refers to the ability of a supply chain to anticipate, prepare for, respond to, and recover from disruptions in order to maintain or quickly restore normal operations. It involves building flexibility, redundancy, and agility into the supply chain to adapt to unforeseen circumstances without significant disruptions to the flow of goods and services.

How can you measure supply chain resilience?

Supply chain resilience can be measured using various key performance indicators (KPIs) that assess different aspects of resilience. Some common metrics include:

  • Time to recover from disruptions
  • Inventory levels and turnover rates
  • Supplier performance and reliability
  • Lead times for procurement and production
  • Financial impacts of disruptions
  • Customer satisfaction during disruptions

By tracking these metrics and analyzing performance over time, companies can gauge their supply chain resilience and identify areas for improvement.

Why is supply chain resilience important?

Supply chain resilience is crucial for ensuring business continuity, reducing operational risks, and maintaining customer satisfaction. It allows companies to withstand and recover from disruptions more effectively, minimizing the impact on production, distribution, and revenue.

Supply Chain Resilience Simplified

Ware2Go, a UPS company, is simplifying the end-to-end supply chain to enable merchants of all sizes to compete and grow in the face of supply chain disruptions. A distributed warehouse network, supported by best-in-class supply chain technology and freight services helps merchants transform their supply chain into growth driver for their business.

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