Building Resilient Supply Chain Networks to Increase Logistics Reliability

The 21st-century supply chain and logistics networks take cues from Adam Smith and the pin factory concept. In 1776, Scottish economist Adam Smith in his book The Wealth of Nations noted the division of labor in a pin factory and breaking tasks down into smaller parts, the system can generate exponential results. Contemporary retail and logistics business is defined by big data and data sciences. The race for identifying shifting consumer dynamics and preferences has become fiercer than ever. The chaos created by supply-side fluctuations and logistical issues has affected businesses across the globe. 

The world witnessed massive industry shutdowns and pandemic lockdowns coupled with global trade as well as the Ukraine war that led to a brutal impact on the supply chain. However, the Global Supply Chain Pressure Index was close to its lowest level in October 2022 in nearly two years. When the supply chain is expected to bounce back this year, the onus is on the industry players to build a resilient supply chain and logistics networks to increase delivery reliability and success rate. 

Key Challenges 

For India to effectively bridge the competitiveness gap of USD 180 billion vis-à-vis the supply chains of advanced nations, there are certain challenges that need to be overcome. With an aim to consolidate volumes with suppliers, companies have been prioritizing efficiency over redundancy in their supply chains. In the presence of stringent regulations and higher tariffs, the performance was affected by insufficient capacity, reliance on single suppliers and inventory buffers. Companies faced unprecedented challenges posed by the Covid-19 pandemic, which led to uncertainty of demand, long delays and operations shortages. 

It is worth mentioning that product portfolios and offerings in the market have increased in size and diversity. In addition to it, the production and supply networks have become increasingly complex. Logistics is susceptible to outside influences such as adverse weather conditions, geo-political disruptions and economic uncertainties. The volatility of customer segments is another challenge. There is also rising demand for promoting sustainability by multiple stakeholders across the globe. 

Strategies to Build Resilient Supply Chain and Logistics NetwApril 19, 2023orks

Increasing the ability to absorb shocks: With the rapidly changing global scenario, it has become imperative for companies to absorb shocks in the day-to-day and end-to-end supply chain operations. The aim is to minimize the risks resulting from complete network shutdowns by the use of buffers and strategic inventory. It may be the right time to redesign the global network keeping in mind the novel challenges. Proactive management of suppliers and new parameters for supply chain buffers can go a long way in future-proofing the supply chain. Using technology to accurately plan future capacity requirements and automating delivery operations based on business constraints and customer expectations goes a long way in ensuring supply chain resiliency. 

Big data and advanced analytics: With data visibility and advanced analytics, companies can acquire a substantial insight into the customer’s mind and can deliver high-quality products faster in response to customer demand. Companies must prepare to capitalize on this novel tech field to extend scalability and customization options. It is now possible to anticipate disruptions and take appropriate actions even before the issues perpetuate. Fragmented supply chains can be transformed into agile, collaborative networks which are connected by dynamic workflows that give real-time data for supply, logistics, asset management, and other services. 

Ensuring collaboration and integration: For the products to move seamlessly across the network, increasing harmonization in platform, product and plant is necessary. This can be achieved by regionalizing the network and standardizing components across multiple products. The key is to simplify and digitize sourcing policies and create more opportunities for placing higher volumes among multiple suppliers, which can result in a fully integrated, efficient and effective supply chain. 

Digitization: It is necessary for companies to optimize the logistics modal mix and invest in smart logistics management by embracing more high-tech platforms. It is the opportune time to digitize 80-90% of supply chain operations and take an omnichannel approach to generate better results. It can help neutralize unprecedented speed bumps and demand escalations common in these changed post-COVID circumstances.

Businesses have long known the importance of a resilient supply chain. No organization can be an island as they are dependent on efficient and reliable transportation and communication systems. To further enhance supply chain performance India needs to take effective steps towards digitization to revamp the retail and logistics supply chain ecosystem. Companies need to sense, predict, and respond to market dynamics which is only possible through flexibility, visibility, and collaboration.