In the supply chain sector, disruption is the new normal. Examples range from geopolitical tensions in the Red Sea leading to slower, reduced trade and rising global costs, to mounting pressures on sea freight and truck transport beyond the region.
Diversion, disruption, and disaster — Supply chains in 2024
Diversions from the traditional Suez Canal route to the longer Cape of Good Hope add approximately 9,000 nautical miles to shipping routes. This has caused air freight costs to skyrocket. As a result, logistics providers reported a 25-30% increase in demand for mixed sea and air transport in January 2024. Meanwhile, the broader transport landscape also faces significant challenges. For example, Mediterranean ports across Algeciras, Barcelona, and Tangier-Med also find themselves grappling with unprecedented congestion.
Outside of transport, disruption is also becoming more common and severe. T combined disruptions of the COVID-19 pandemic, political tensions, and extreme weather events have significantly reduced material and labour availability across various industries’ supply chains. In fact, by 2050, developing nations may lose approximately 92 million working-age individuals and gain over 100 million elderly people. This development poses significant issues across a range of industries. The risks associated with overseas operations are leading to an increase in reshoring and nearshoring. But these strategies also come with their own set of obstacles. Reshoring and nearshoring require investment in new infrastructure, updates to distribution networks, and a potential need for buffer stocks to minimise disruptions in the interim. In short, there are no easy answers.
ESG is another area that poses significant challenges and opportunities for businesses. Reducing Scope 3 emissions, for example, which often make up a substantial portion of a company’s total emissions profile, requires full visibility across complex supply chains, the collection and reporting of organised and standardised data, compliance with regulatory standards, and ongoing stakeholder engagement.
In the face of the above supply chain trends and challenges, organisations must build operations with the right balance of resilience and efficiency, or risk losing out. Here are six key strategies to follow to remain ahead in today’s disruptive marketplace:
1. Data transparency and visibility
To effectively navigate an interconnected supply chain ecosystem, organisations must establish a robust foundation of transparent and accessible data.
Leaders must prioritise rectifying foundational issues within master data, ensuring data integrity, and optimising system architecture for seamless data flows. Enhance visibility and mobilise near-real-time information sharing to detect trends at an early stage and make informed, agile decisions.
2. Scenario planning
As supply chain dynamics become more complex, traditional planning methodologies are no longer adequate. Leaders need to invest in advanced scenario modelling capabilities to assess the impacts of possible scenarios across the supply chain.
Adopt the right planning tools and integrate inputs from business-wide functions to build comprehensive plans that balance capacity, risks, customer demands, and financial goals.
3. Diversification and resilience
Building resilience through diversification is essential to mitigate disruptions effectively. Organisations must cultivate a diversified network of suppliers, warehouses, co-manufacturers, and distributors capable of swiftly adapting to unforeseen disruptions and shocks.
4. A balanced approach to inventory management
Strategically deploy buffers for the right products in optimal locations.
Leveraging dynamic portfolio segmentation and predictive replenishment strategies can help businesses shift from a reactive to proactive inventory management approach, allowing them to maintain optimal stock levels while minimising risks and protecting cash.
5. Strategic partnerships and collaboration
Strategic partnerships and collaboration are crucial for success in an interconnected global marketplace.
Supply chain leaders must collaborate closely with logistics providers, suppliers, and stakeholders to create a network of trusted partners. Sharing resources, information, and best practices can help organisations to enhance their resilience, responsiveness, and overall quality of products and services throughout the supply chain.
6. Sustainability and circularity
Supply chain leaders must embrace ESG principles. Sustainability should permeate every aspect of operations, from product design to end-of-life management.
Promote circularity by reviewing product lifespans, implementing take-back schemes, exploring recyclable materials, and adopting low-emission distribution channels. By assessing their carbon footprint and building tailored improvement strategies, organisations can integrate sustainability into the very fabric of their operations, paving the way for long-term value creation and resilience.
Final thoughts
Supply chain management has been fraught with challenges in recent years. In response, businesses are trying to acclimatise to the volatile market in which they now find themselves.
Meanwhile, they must also prepare themselves for the new challenges that the future is likely to bring. That will requirebuilding operations with the right balance of resilience and efficiency.
The companies that are proactively adapting, leveraging technology, diversifying supply chain strategies, and embracing innovative approaches to ensure resilience and competitiveness are the ones that will be able to successfully navigate the ever-changing global supply chain landscape.
- Risk & Resilience
