Strategic Supply Chain Planning 2021 | Beyond COVID

Companies are looking at diversifying their supply sources. Whether this means on-shoring, near-shoring or simply adding alternative regions to the existing base. This is not a quick proposition. Suppliers have to be located, certified and tested. Order patterns have to be established and inventory policies implemented. All of this takes data, analysts and time. Perhaps the most difficult part, managing change in your supply chain planning.

Whether you are a manufacturer, distributor or retailer you have to be able to support more direct consumer channels than you may have traditionally. This will involve better collaboration, inventory management and alternative fulfillment and transportation options. Again, this requires data, analysts and change management.

The companies that will lead the pack are the ones that recognize the permanency of the COVID changes on the horizon and establish long-term supply chain strategies to mitigate risk and guarantee products and service to the end customer.

Planning for Supply Chain Flex is Paramount

An exponential boom in e-commerce sales rapidly created significant congestion for last mile deliveries. The effect spilled across the entire supply chain. At distribution and fulfillment centers some shippers saw their small packages go unshipped due to volume caps implemented by parcel carriers. Elsewhere, LTL carriers facing heightened shipment volumes at their terminals delivered fluctuating service levels.

As a result, many companies examined how they complete final deliveries to their clients, a process that retail giants like Amazon have nearly mastered. More and more companies are shifting toward expedited service from either existing brick-and-mortar facilities or an adjusted network of distribution centers. Smaller, urban fulfillment centers added in certain areas can help skirt site-specific volume limits. More options make you less susceptible to geography-based capacity constraints.

But you must understand how those changes in network design affect cost and service performance. 

Through its ability to evolve a massive local network, Amazon proved to be among the most reliable carriers during the disruptions of 2020. Not everyone has the deep pockets to establish an Amazon-like network with large distribution centers and cross-dock strategies. 

However, you can determine where you can compete with that sprawling service network – and where you cannot. SKU rationalization, margin analysis of different channels and overall network design analysis can help businesses of any size understand where growth is occurring and where it is not. From there you can align your supply chain planning based on the demand patterns your business is experiencing.

Look Upstream to Determine Opportunity

With everything happening in the supply chain environment, it is important to get outside of your business and examine your network upstream to your suppliers. This provides insight in several important areas. 

Over the past 20 years companies have worked to reduce and remove inventory where possible, achieving the absolute least cost in the process. Today, you must balance inventory, determine which inventory is right, and even decide the right customers to serve. Understanding your processes, as well as those of your partners is integral to transportation cost management.

When your retail partner asks you to drop ship product to their customers, can you segment your inventory into the different physical channels to both serve those individual orders and continue filling regular store-level inventory needs?

How should your inventory model change as you move toward insourcing or reshoring? With longer lead times and growing landed costs emerging from foreign vendors, local suppliers allow you to manage a smaller inventory or direct ship to customers and, ultimately lower overall cost. Do you have the contingencies in place across your network of vendor partners to deploy local or regional sourcing in the event of ongoing disruption in Asia?

By stepping outside your own walls and understanding processes upstream and downstream – as well as their alternatives – you become a stronger partner, especially if you can offer your suppliers visibility into your own demand. Ultimately, that level of collaboration helps your partners plan better, improving efficiency and service to you in the process.

By helping customers understand their total value stream and deploying a lean-minded supply chain strategy consultation, we help them visualize how changes to their network can improve cost and service across their transportation environment.

Capacity for Change can Limit Improvement

Achieving flexibility in your supply chain requires both an ability to recognize when processes are not performing and a willingness to apply change. If you don’t change, nothing changes, and it became especially clear in 2020 that a lot of companies don’t know how to implement that change. 

Leadership has to want to change and improve, and it is important to understand that if you are not constantly problem-solving then you are going backwards. Smaller companies understand this especially well, but larger companies are often separated into silos and metrics conflict with day-to-day activity.

Are you willing to let your partners save you from yourself? If leadership is not willing to accept analysis and insight that supports change, then activity rarely changes until crisis occurs. And when that crisis occurs, without analysis to support process improvement, you may not be able to determine the right practices to change.

Performing that analysis is no easy task. A lot of smaller companies don’t have the skillsets or capacity to complete that data-driven look. Likewise, medium and large companies may dedicate people to monitor performance in different supply chain areas. They may not have the groups of people capable of not only understanding how to complete the analysis, but also problem solve. 

That is where Transportation Insight helps. We not only have the capacity to complete analysis of SKU-level performance, network design and alternative, contingency supply chain strategies. Importantly, we also teach your teams how problem solve, a skill that you can then pass along to others in the organization.   

Once we deploy a problem-solving mindset alongside analysis of your supply chain data, we can create a map of the transportation activities across your network and determine options for alleviating problem points that drive up your cost. By pairing those continuous improvement efforts with renewed network flexibility that eliminates the risk of disruption, Transportation Insight positions you for improved cost control and enhanced opportunities for growth. 

For more insight that will help support your supply chain strategy in 2021, download our latest industry forecast. Read the First Quarter ChainLink 2021 for a multi-modal look at the transportation trends that will affect your business in the year ahead.

E-Commerce Logistics Demands, COVID-19 Empower Ocean Alliances

Although there is still a slim chance that the fourth quarter produces some rate compression – or a downturn in the need for e-commerce logistics. When freight levels are at an all-time high, there is little motivation for the three major shipping alliances to drop rates significantly during the remaining calendar year.

Shippers looking to 2021 would be wise to consider contingency budgeting – especially if you are a major importer competing in a supply chain environment that continues to be affected by ongoing growth in online sales and e-commerce logistics.

Likewise, there has never been a more important time to reassess your entire import supply chain to validate compliance with evolving trade regulations. Emerging pinch points in the international supply chain are elevating risk for shippers who must be prepared to address traditional risk areas that carry a financial impact.

As we have stated since early 2019, contingency planning must be the part of your monthly and sometimes weekly business plans. Diversification in foreign sourcing has never been more critical, particularly in an election season that has pushed global trade forward as individual candidates differentiating issue.  

Close review of the international transportation landscape can lay the groundwork for developing strategies that mitigate that risk heading into 2021.

Alliances Take Control Amid E-Commerce Boom

Consumer behaviors are shifting the traditional retail models, and the unchecked growth of e-commerce is keeping the global supply chain packed with product. 

Credit some of that international freight volume to the rapid production and movement of Personal Protective Equipment (PPE) in response to a global health crisis. At the same time, retail supply chains have been irreversibly impacted by the functional success of e-commerce. Until some of the demand cycles in both realms stabilize, predicting ocean shipping rates will be a challenge.

More importantly, the three major shipping alliances response to COVID-19 demands the attention of organizations that rely on global commerce and e-commerce logistics. Vessel operators have shown remarkable discipline by matching supply to demand volatility.

During the first half of the year, the three alliances (2M, Ocean Alliance and THE Alliance) constricted supply by canceling dozens of scheduled voyages with the intent to remove excess capacity. However the net effect was scarcity of space, i.e. rates were increased monthly or bi-weekly and started to build. Representing 21 ocean vessel operators and roughly 10 million 20-foot equivalent units (TEU), these alliances have maintained rate discipline as the retail supply chain began to open in July in August. 

In the past, increased demand for service and the prospect of rate increase motivated operators to add sailings. With a strategic approach that ensures vessels are filled before others are added, ocean carriers keep upward pressure on rates that are roughly 80 percent higher in a year-over-year comparison to 2019.

This strategy supports a more dependable service for international shippers as it creates more reliability for in-country logistics operators, but if the alliances maintain this discipline, plan for rates to stay elevated. Solid bookings will continue through October and contingency budgeting should be a focus for major importers.

Persisting Pinch Points Create Risk

As we approach what has traditionally been a calm period at the end of the e-commerce logistics peak season, the ports of Long Beach and Los Angeles are at capacity. Historically higher volume for this time of year will undoubtedly spur downstream challenges deep into Q4 and into 2021. 

Finding available chasses to support container movements will continue to be a problem into December. As these containers and chasses (to a lesser degree) move in country and on the rail, it is hard to balance the need for equipment during a disruption-filled year like we’ve had. Vessels hoping to expedite movement for the last wave of peak season freight to North America are now waiting for containers to come back to port so that have something to load and ship. 

We know there will be an end to this kind of imbalance, but we have not gotten there yet.

The timing has never been greater for organizations to assess their entire import and export supply chain. Look for places to increase efficiency. Identify pinch points that elevate risk that emerges in times of global volatility. At this point, organizations should have complete awareness of the supply chain challenges arising during COVID-19 and address their preparedness for the next global disruption, both economically and around traditional risk areas. 

Trade Regulations and Tariff Battles Require Eye on Compliance

Plaintiffs representing a diverse set of industries are suing the U.S. Trade Representative (USTR) for relief from China 301 tariffs. The argument: tariffs implemented without sufficient advanced notice caused unfair and improper financial harm to their organizations. Many shippers have been negatively impacted, some to a crippling point, and they are looking for any dollars they can get.

These organizations – including some of the world’s largest brands – will not likely get complete relief, but their actions demonstrate that businesses will not sit idle when trade laws are put in place, as they argue, without warning.

Meanwhile, implementation of the trade regulations intended to replace the North American Free Trade Agreement continues to carry some unexpected consequences.

The U.S.-Mexico-Canada Agreement (USMCA) is having the largest effect on businesses close to the automotive supply chain, but many companies were lulled into thinking there would be limited changes in the new agreement. Updated documentation is required to execute cross border entries. Make sure to review your international trade compliance processes to avoid this type of needless risk caused by what seems like a simple change in regulations. 

Disruption – Not Necessity – Is the Mother of Supply Chain Improvement

However, the novel Coronavirus outbreak created major supply chain disruption which affects all companies and industries. In the interest of safety, a whole new set of rules govern how we do business. Some of those trends coming out of this include:

  • Rules on social distancing, mandating how many people can be in a space at a given time.
  • Truck and delivery driver safety suggestions for transporting goods from the warehouse to the end customer.
  • A spike in e-commerce orders and home deliveries across industries, including grocery and consumer packaged goods.

These changes have one thing in common: They all rely on a strong and resilient supply chain. Without a constant flow of inbound components and finished goods, they can’t go from origin to the warehouse, and then outbound to the end customer.

This is why it’s critical to master your supply chain now. Understanding where components come in, measuring key performance indicators, and cutting out waste is the only way companies can get the insight they need to drive future invention from supply chain disruption.

Excelling During a Period of Infrastructure-Led Disruption

When the novel Coronavirus began spreading in the United States, we saw a lot of supply chain disruption. The truth is we may not be done. A recent Gartner analysis suggests we could see three different scenarios play out as the country re-opens for business: a short-term disruption leading to a quick recovery, a long-term disruption leading to protracted recovery, or a resurgence of COVID-19 cases leading to one of the two other scenarios.

Because we don’t know which recovery to expect, your supply chain leaders need to understand infrastructure and operations weaknesses and opportunities now. There are many different ways to do this, including supply chain mapping and modeling, identifying new supply partners closer to your facility, and identifying the best transportation networks to achieve your customer service goals.

So why invest in technology and analytics today? Historically speaking, companies who invest in their processes and people during disruption experience a faster recovery than those who don’t. More importantly, a disruption allows you to view your operational plans candidly and determine how the combination of leadership and talent, technology, business mission and values, and process framework can improve your supply chain.

As we see from the Gartner figure above, infrastructure-led disruption can directly lead to new innovations within your supply chain and network plans, but only to the extent your talent drives them. Thus, disruption – not necessity – is truly the mother of invention.

Where Do We Start Driving Infrastructure-Led Disruption?

The first step to creating long-lasting change starts inside your company. Now is the perfect time to start having those conversations because leadership teams were talking about making lasting change well before COVID-19 became part of the common vernacular.

2019 survey of boards of directors by Gartner revealed those leaders anticipated a complete transformations of their infrastructure and operations by 2025, with the core goals being improving maturity, driving quality and creating more agile supply chains. The current situation gives leadership teams two options: either attempt to improve within the legacy framework, or use infrastructure-led disruption as an impetus to improve operations.

Trying to improve a legacy model may not work for several reasons. If you can’t answer these questions, any attempt to repair a broken system could create more problems:

Going through a supply network analysis will not only answer these three questions, but give you the analytics you need to make better customer-focused decisions. By going through the exercise and continually improving infrastructure and operations through regular analysis, your team can drive true cost savings and customer experience improvement, leading to improved service and earning more orders over time.

Start Your Infrastructure-Led Disruption Today

Your leaders don’t need to approach infrastructure-led disruption on their own. Transportation Insight has the tools and technology your team needs to drive innovation, combined with the insight into thousands of supply chains across industries. With our expertise, our teams can help you understand where your supply chain is falling short, and where you can drive improvement both through disruption and into recovery.

Our team works through the lens of your business perspective, helping you unlock value from your supply chain and creating efficiencies into the future. Contact us today, and let us help you use disruption a tool to drive long-lasting success.

From Micro to Macro: The Effect of Social Distancing on the Supply Chain

In restaurants, they are moving tables and putting a hard maximum on the number of people allowed inside. Although the return of patrons generates badly needed revenue, moving tables apart means less diners, resulting in less money coming in the door. In order to maintain a peak level of performance, those restaurants need to turn tables and customers faster to achieve the same amount of revenue.

A similar concept will be introduced into the supply chain, as factories, warehouses and distribution centers come back online. Employees will need to consistently stay six feet apart, forcing managers to figure out how to keep up productivity while adhering to guidelines. Are you prepared for the change?

The Newest Constraint in the Supply Chain: Social Distancing

There are several supply chain constraints that most companies can plan around. These include capacity, throughput, and on occasion, emissions.

Using an Extended LEAN approach, managers and facilities are encouraged to reduce the amount of time and distance per process. This reduces waste throughout the production line, improving efficiency and ultimately providing more output with the resources already in place.

But due to social distancing, there’s a new constraint supply chain managers must deal with: the maximum amount of physical distance you can remove from production. Some of these situations are easier to plan for: Truck drivers can stay in their cabs, while using e-signatures for receipts.

Other conditions are going to be much more difficult to apply: In the interest of keeping employees healthy, they must consistently stay six feet apart. Companies now have to determine what that means for receiving, production and shipping. If employees have to maintain a safe distance, how does that affect their critical daily operations? Some companies say they are experiencing a 40 percent decrease in capacity due to the social distancing protocols.

Social Distancing Extends From the Facility and into the Network

The physical plant isn’t the only stakeholder affected by social distancing. The impact of lost production and capacity also extends to your logistics network.

If your output is slower due to social distancing, it can have a ripple effect on everything from loading trucks and time-in-transit to service guarantees. Capacity decreases mean it takes more time to load trucks and impedes trucks from moving freight from point-to-point. That cuts into your bottom line.

From there, the issues fall like dominoes. The late truck has more time on the dock, so your freight is arrives at its destination later. When it does, there could be a delivery failure due to a closed dock or a receiver bound by rules prohibiting deliveries outside a set window. Additionally, freight bills could increase because transportation providers are unwilling to wait a long time for freight loading and unloading. Your carrier partners might not be able to meet service times because of your approach to social distancing.

There are ways to approach this that will help your business move forward. Once the impact to individual facilities is determined, it’s possible to reconfigure your logistics network to meet the current capacity needs. Some of the options your team can explore include:

  • Do you need to reduce inbound material shipments until capacity can increase?
  • Should you adjust your outbound schedule to ensure you can maximize transit lanes?
  • Can your team or warehouse be more efficient in managing inbound and outbound freight?

Having a Partner to Help You Adjust for Social Distancing

It’s critically important to have a partner in your corner that not only understands how to configure logistics operations using tried and true techniques, but how to translate them to the broader supply network to balance cost, service and risk. While technology plays a key part into this transformation, these solutions need to be approached with a holistic solution in mind.

As we reopen facilities and plan for the “new normal” for the foreseeable future, it’s important to solve these problems now. Because we have no idea when social distancing practices will ease, the problems you face now won’t go away on their own. Instead, solving them will help you become a “shipper of choice” as activity ramps up. You can also maintain profitability and positively plan for the future.

In this race, Transportation Insight is your complete partner in success. Our technology tools allow you to decide between the best carriers and networking options.We can also help you drive success through supply chain mapping, optimization, and applied Extended LEAN strategies with social distancing in mind. Because we’ve worked through thousands of supply chains with hundreds of companies across industries, we know how to apply the best practices and wisdom around your current and future strategies.

Partnership matters – and Transportation Insight is prepared to help you now and well into the future. Contact us today to get started with a consultation on how your facility can manage productivity despite social distancing.

Indirect Supply Management Matters in Today’s Environment

With certain supplies harder and more expensive to secure, how can manufacturers ensure operations continue on a level playing field? The answer lies in a company’s approach to indirect supply management.

Challenges Faced by MRO and Office Supplies Due to COVID-19

When you think about the MRO supply chain, it almost seems simple. Replacement parts and consumable supplies come up the chain and into your storage. When a piece needs to be replaced, it comes out of currently held stock. To ensure stock doesn’t run low, warehouse managers keep a recurring order open to ensure replacement and consumable items are available.

However, the COVID-19 pandemic changed everything. Many of the pieces we take for granted, like personal protective equipment, were immediately redirected to first responders who needed it more. Additionally, normal supply chains were disrupted because of shutdowns in China and companies utilizing a work-from-home model to prevent the spread of novel Coronavirus.

Protective equipment and replacement parts are only two of the potential shortages MRO operations faced by buyers of indirect supplies. The slowdown also extends to regular office supplies. As more people are forced to work from home, the demand for copier paper is dropping. As a result, two of the major paper producers in the United States have temporarily shut down at least three plants which produced office paper for printers and copy machines.

Although it appears that the supply chain may be in a crisis, your business doesn’t have to navigate these changes alone. By tapping into a group purchasing environment, sourcing MRO and office supplies doesn’t have to be an excruciating process.

Why Indirect Supply Management is a Critical Part of Your Business

There’s a lot of power in group purchasing. Groups who regularly order recurring supplies are able to get volume discounts and oftentimes improved availability for even the most in-demand supplies.

For example: A group of our indirect sourcing customers reached out to us to help secure face masks for their regular operations in breathing hazard environments, such as painting and other high-particle- producing environments. Our team quickly got to work on the request, and was able to find a source of high-quality face masks. After ensuring their quality control was to the clients’ standards, we secured orders at a competitive price with a quick delivery window, ensuring our clients’ businesses could continue to operate uninterrupted.

Indirect supply management is a tool available to your team to find the essential items you need at reasonable prices. By working with a partner in this space, your company can consolidate their overall supply space and form strategic partnerships on items they will regularly need. What makes our partnerships unique is that we can put it all together in a group purchasing model, which allows us to drive savings for our partners.

When you combine indirect supply management with other disciplines, like LEAN management, your company can actualize savings in multiple ways. By focusing on reducing waste and improving efficiency, the supplies your company relies on can be utilized smarter. While this drives cost savings at the core, it also gives your team a mindset of constant improvement, which benefits your entire organization through new thinking and problem solving skills.

Get Support from the Leaders in Indirect Supply Management

No matter how you are sourcing your products today, it can be improved through consolidation and smart partnerships. As you set your plans towards the next phase of your business, now is the time to look at your accounts payable data and get a spend analysis to map out how you can get even greater efficiency around your indirect materials operation.

Transportation Insight is your partner in driving success now and into the future. Let’s start a conversation today about how we can drive savings for your company together.

Examine Indirect Spend to Drive COVID-19 Cost Savings

The spread of the COVID-19 virus disrupts transportation networks, products paths and consumer demands that drive your performance. The problems that threaten business viability merit priority response.

In the current Coronavirus climate, the supplies for your everyday functions also need attention. An expert partner who can take over management of complex indirect spend areas can provide critical cost savings, which you can rapidly deploy in other areas of your business.

A reliable sourcing resource can also leverage long-term relationships and collective buying power to help make sure you have the Maintenance, Repair and Operation (MRO) items, office products, and packaging materials required to support your operations.

Here’s some of the latest marketplace activities that could affect costs in your indirect spend categories and challenge your ability to secure vital supplies.

MRO Items for Health, Safety in Short Supply

Most organizations that support MRO procurement are operating distribution centers and warehouses as usual, with added attention to necessary safety precautions at these work sites. Products are still moving out facility doors. However, distributors are placing priority on serving needs for specific “essential” industries, such as healthcare providers and first responders.

That’s a good business decision for these supplier partners, particularly as they face short supplies for personal protection equipment. Protective gloves, masks, coverall suits and similar products are all in back-order status.

Although healthcare facilities get priority service for these items, if you have needs, go ahead and place orders with your supply partners to make sure you are in the queue when supplies become available.

To expedite MRO service, many suppliers are shipping products directly to production facilities. This can expedite the process of getting needed products to end users. Make sure to explore direct shipping options from your supplier partners.

Social Distancing Affects Vendor Managed MRO Inventory Process

One of the biggest impacts of the novel Coronavirus in the MRO space is in the area of vendor managed inventory. State and federal directives are limiting contact restrict suppliers’ ability to complete on-site visits to monitor MRO supply needs.

Vendors provide an important resource in making sure you manage an optimal supply of MRO items. Too much product can consume valuable operational and storage space. Too few resources can threaten a shutdown at critical times.

To make sure their clients are able to continue monitoring their MRO needs, many suppliers are providing hand-held scanners and creating a customer-managed inventory environment. This keeps products moving, but it is important to monitor activity. Supply inventory can quickly get out of balance and create unnecessary costs.

Available Office and Facility Supplies Still Moving

Distribution of office and facility supply products continues as usual, but many of the same products in short supply on grocery store shelves are also limited in commercial and industrial settings. Paper products, disinfectant, hand sanitizer and similar products get priority delivery to healthcare operations, leaving a short supply which puts limits on available resources.

In some geographical regions, the desktop delivery option is discontinued, and the typical next day delivery guarantee is suspended. While there’s no sign of a supply crisis for the majority of these items, it may become harder to get some of the more common office and facility supply items as more states adapt to shelter-in-place environments..

When you are dealing with your supplier partners, a little bit of patience can go a long way. Like many of us, they are working in remote environments. In some cases, companies providing essential workplace supplies employ thousands of people unaccustomed to working outside of the office. As they shift remote, some systems aren’t engineered to handle additional workflow yet.

Rest assured, your supply partner is working to meet your needs. When you seek support, response may be delayed, but having patience with your trusted partner can reap benefits today and tomorrow.

If you encounter supply changes, we can leverage our power as a Group Purchasing Organization to tap additional supply resources. In the world of indirect sourcing, strategic partnerships not only support a network of options, but they also can help realize significant cost savings.

E-Commerce Drives Boom in Cardboard, Packaging

Many manufacturers and distributors of packaging are deemed essential because they are supporting medical supplies, pharmaceuticals, energy generation, and food and beverages. Increasingly, operations not supporting essential end uses are production reduction or shutdown.

Corrugate facilities are running at full capacity to meet a demand spike driven by online ordering. One key area to watch in this aspect of packaging is linerboard prices. Right now, those prices are stable after a slight decrease in January. Linerboard pricing will deserve a close eye over the next few months as old corrugated container (OCC) prices rise and forecast demand increases.

For flexible packaging products like polybags, stretch film, poly sheeting, etc., prices continue to decline due to a decrease in global oil prices. With many e-commerce shipments relying on these materials, it will still be important to monitor not just cost, but ability to access supply.

Rely on Strategic Sourcing, Relationships, Patience to Weather the Storm

When it comes to indirect materials that support operational process, many organizations make purchases on a tactical basis. Now, when uncertainty clouds the market place, a partner that deploys a strategic mindset to indirect spend can be a vital resource.

Transportation Insight has developed strategic partnerships with suppliers. In communicating with our supplier partners more and more, we’re learning that MRO, office supply and packaging providers are supporting the clients that work well with them. When you’ve built relationships over decades, as we have, achieving win-win scenarios for everyone involved becomes second nature.

Let us leverage the partnerships we’ve created to help you get indirect spend reductions, and, more importantly, access reliable supplier partners that you can depend on during times like these.

Right now, many organizations are thinking about short-term survival. As you prepare for business after the COVID-19 pandemic recedes, instead of revisiting old strategies, consider opportunities that deliver better service at improved cost.

Let us show you a more strategic way of addressing your indirect spend management. To understand how much you can start saving today, schedule an indirect spend assessment. We often achieve double-digit savings for our clients, and we may be able to help you drive cost out of your supply chain.

Supply Chain Risk Management Lessons from the Military

When you think about the biggest risk to your company, what comes to mind? A data breach is probably high among concerns, and there’s good reason:this year alone, the Center for Strategic and International Studies identified 16 significant cyberattacks around the world, leaking hundreds of thousands of records.

What about a breach in your supply chain? Natural disasters, factory fires, rising tariffs, geopolitical issues and disease epidemics can all threaten your logistics network. Do you have a plan in place to respond in the event of significant disruption? If so, when was the last time you dusted it off and tested it?

Supply chain risk mitigation is more than sourcing. It requires an understanding of supply and demand. You need to be able to maintain continuity across your networks. If you don’t have backup plans and network strategies in place, one slip could jeopardize your entire business.

Mapping direct risks to your supply chain

Every supply chain has risks, regardless of how well it is planned. In the past five years, we’ve seen multiple threats to the global supply chain, ranging from natural disasters to labor disruptions.

Some of those issues are easier to prepare for than others. When union members across West Coast freight terminals walked off their jobs in 2015, indicators were present. Nine months of contentious negotiations, led to public jabs thrown by both sides, and ultimately, a work stoppage. In this situation, companies had time to make plans and consider alternative ports of entry. Without those preparations, there’s a risk of being affected by the $2 billion in lost productivity a full shutdown can cause daily.

Other situations are impossible to foresee. When Hurricane Harvey made landfall in Houston, widespread flooding damaged homes and threatened lives. Factories were forced to shut down, only opening as part of the massive cleanup efforts. For some businesses, this created two problems: The disaster created a spiked demand for cleaning and construction supplies, but crippled local availability to produce them.

In these situations, do you have alternate network maps available to identify where you need to ramp-up production? Do you have a secondary port identified to support your inbound shipments? Without a smart contingency plan, you not only risk losing inventory – you put in jeopardy your operational success as a whole.

Supply chain lessons learned in the Marine Corps

While serving in the U.S. Marine Corps I learned military logistics strategies that have been integral to global success. Among the supply chain support available to the Marines is the Maritime Pre-Positioning Force. Today, two ship squadrons – one in the Indian Ocean, and one in the South Pacific – stand ready to provide necessary combat support. If a Marine expeditionary brigade is deployed anywhere in the world, these ships can quickly drop all the equipment and supplies they would need for up to 30 days.

The MPF is one of many tools Marines have to ensure operational victory. Logistical strength also comes from the chain of command: Generals communicate goals to senior officers, who create multiple plans and execution strategies. A plan of attack goes to junior officers, who work with the non-commissioned officer brigade to map out an execution path. The NCOs are then empowered to enact the plan with platoons and squads, while changing and adapting to the developing situation.

There should be a direct alignment between your organization’s chain of command and your supply chain. If you have multiple strategies in place and can execute on any given one in the event of disruption, you can set up for operational success.

Using military intelligence in risk mitigation

As illustrated, the military does logistics very well. When thinking about that supply chain, we broke it down to three key needs: beans, bullets and bandages. Those items summarize our critical needs for success. Without food, we would run out of sustenance and the strength to fight. Without ammunition, we would have no means of defense and advance. And without bandages, we wouldn’t be able to self-care and prepare for the next wave.

Because these three items were crucial, the supply chain for each was diversified, so that we could always source them. Think about how that reflects in your logistics network. If you can’t access a key component for your flagship product, what would you do to ensure production doesn’t stop?

We experienced this risk process with a large Consumer Packaged Goods client that was considering a new location on the U.S. Gulf Coast. By incorporating hurricane strike probabilities at different locations, the site identified was 200 miles away from the “optimal cost” solution when risk was considered. In addition, by running sensitivities, we were able to identify the optimal secondary sourcing locations in case of a shut down.

It’s important to know how your supply chain is prepared with the essentials for success. Although your company may not survive on beans, bullets and bandages, there are components and pieces that you can’t live without. As you plan your network design and consider options and scenarios, consider the following questions:

  • Are active contingency plans in place?
    If you don’t have an active plan to circumnavigate crises in your supply chain, you don’t have mastery over it. Before another international disruption takes place, it’s important to take down the binders with contingency plans and simulate alternate sourcing scenarios. If you train for an emergency, you are empowered to execute when it happens.
  • Can you prioritize the most urgent needs at every supply chain node?
    When supply and inventory are threatened, you need the ability to prioritize customers and orders. This requires intelligence at every supply chain node: source, distribution center and end client. By creating a plan for every potential point of failure, you can get in front of the situation and drive customer satisfaction through disruption.
  • Where do I need operational redundancy?
    When you look at the most important items in your supply chain, how are you sourcing them? If you are ordering components from a single lowest-cost supplier, you could be in jeopardy. Although it may cost more in the short term, creating operational redundancy can give you both regional and port independence, ensuring key items don’t get stopped in an emergency.

Any given part of your supply chain may fail not because of stress, but because of the unknown. As we think about all the issues that could occur – from geopolitical conflict, to natural disasters, to labor disputes – your supply chain needs to be optimized regularly for continued mastery.

By utilizing Transportation Insight as a logistics partner, your company can access the software and expertise it takes to keep your network model up to date. Contact us today for a consultation, and learn how we keep your business driving forward.