In today's dynamic and interconnected global marketplace, supply chain disruptions have unfortunately become an inevitable challenge for businesses no matter the industry. With the impact of COVID-19 still fresh in the logistics world, the Red Sea Crisis [LINK] is highlighting how susceptible supply chains can be to conflict or natural disasters.
However, taking certain proactive measures can significantly mitigate these risks and ensure your goods keep moving. We’ve put together some of our top tips for ways you can work on mitigating risk to your supply chain.
1. Supplier Diversification
One of the fundamental strategies to consider is supplier diversification. Relying on a single supplier for critical components or materials exposes your business to vulnerabilities, as should this one supplier experience difficulties then your supply chain stops. By diversifying your supplier base across multiple partners or locations, you spread the risk and thereby reduce the impact of any single point of failure. Evaluate potential suppliers based on their reliability, geographic location, production capacity, and financial stability to build a resilient supply chain network.
Learn more about supplier diversification in our newsroom.
2. Nearshoring or friendshoring
Nearshoring is a common phrase bandied around the world of international trade, becoming so heavily considered that even political leaders like President Biden build them into national agendas. Turning your attention to more local opportunities (or “nearer shores”) for elements of your supply chain can be a very strong way to mitigate risk, as you are less likely to be subject to foreign market or political volatility. You’ll also probably benefit from lower transit times, allowing your supply chain to keep moving quickly.
Friendshoring offers similar protection against economic or political disruption, as this involves turning to countries or regions with political allegiances or trade deals to build your supply chain. These “friends” might offer preferential rates or stable and supportive environments to do business.
However, both these approaches are not always feasible as you might be subject to higher supplier pricing, a lack of skilled work in the area or even an inability to source certain necessary materials.
Want to understand nearshoring and friendshoring in more detail?
3. Make contingency plans
Unfortunately, risk is an unavoidable part of international trade. Any supply chain will create vulnerabilities for a business to a variety of possible problems, which may or may not occur. Disruption can come in many forms, whether on a micro level with a supplier encountering problems which delay your raw materials, or on a much wider scale from national or international political, economic or natural incidents.
If the Red Sea Crisis has shown us anything, it’s the importance of agility. Businesses with more agile processes have been able to adapt to the new circumstances and keep their goods moving. Whether that’s by swapping to air freight as an alternative transportation method, shipping higher quantities to build up an inventory. We’ve seen the businesses who were prepared for possible disruption are those who have been able to minimise the impact felt.
By having plans or ideas in place for a range of “worst-case-scenarios”, you allow your business to shift very quickly and minimise the disruption, as you already have a back-up plan ready. Building a wide network of trusted partners or suppliers, reviewing the geo-political dynamics of countries where you trade, or even just regular supply chain health checks can help you identify where possible risks lie. From there, you can craft various contingencies.
4. Forge the right partnerships
Collaborating with reliable partners, for example a trusted freight forwarder, can truly enhance your supply chain resilience. By seeking out partners with a proven track record of performance, flexibility, and innovation, you benefit from expert support for your supply chain. These relationships will ensure you can build optimised processes for the good times, but it also ensures you have a strong partnership when disruption does hit and means you can find the right response together.
"Trusting in partners with a proven track record of strong customer experience adds immense value to your supply chain.
Check their Trustpilot reviews to make sure you find someone who will act in your businesses best interest."
Keri Barton, Group Sales & Marketing Director, WTA.
5. Utilise the best technologies
In today's digital age, there are so many excellent technologies available which can help take your supply chain to the next level. A key one which can help mitigate risk is a tool which will offer you the maximum visibility over your processes. If you have a platform which can give you real-time updates and insights, then you can see any issues or areas of risk in the moment, allowing you to react quickly and even prevent problems before they happen. By harnessing the power of data and analytics within your supply chain, you can make informed decisions, optimise resource allocation, detect risks early, and overall minimize the impact of any disruption.
Want to discover the next level of supply chain visibility? Discover the WTA Platform today.
While there is no magical answer or process to avoid any risk to your supply chain, there are many ways you can mitigate it and minimise the disruption if and when you encounter issues within your supply chain. These top five recommendations are just some solutions we suggest you consider. Each business is unique, so each supply chain needs and deserves a unique approach to problem solving. If you want to look into ways to mitigate your risk, why not get in touch for a supply chain health check today.
