In this thought leadership piece, Paul Soong, Regional Director at e2open, explains how building a resilient supply chain can help businesses deal with both common and unprecedented disruptions including those caused by a volatile economy, cybersecurity breaches, and extreme weather events.
Building a resilient supply chain to weather disruptive times
If businesses survived the barrage of supply chain obstacles over the last three years, they can overcome anything.
From extreme weather and natural disasters blocking access to resources, port or border congestion delaying transit, to panic buying artificially inflating demand, not forgetting the pandemic, to ongoing war and political unrests resulting in rising inflation and escalating costs, disruption is an understatement for what the supply chain industry is currently under.
A good example of this is the train derailment in New South Wales due to a period of bad weather and heavy rain. The derailment affected the supply chain of numerous companies that used the rail line from Brisbane to Sydney, as well as from Brisbane to Perth.
Now more than ever, the supply chain industry needs to re-evaluate and develop resilient strategies to keep up with the ever-growing complexities and challenges to stay on top. There a few factors that businesses should keep in mind as they plan for the year ahead.
1. Protectionist trade policies and geopolitical posturing
This will continue to cause companies to shift their country sourcing practices triggering problems with labour, transportation, costs, and capacity. The new normal in global trade policy will continue to be highly unpredictable, which means supply chain leaders need to put in place proactive measures to keep supply chains safe or risk becoming a casualty.
As the prices of commodities continue to increase alongside the supply disruptions, it highlights that the protectionist trade policies have a massive impact on businesses and could pose a threat in the foreseeable future.
We are entering a new reality that is amid a bifurcation of the global system, therefore businesses need to stay prepared to face new challenges that stem from the changing geopolitical landscape.
2. Up-to-date international trade knowledge
As trade policies around the globe remain in flux, making it challenging to assess precisely how trade policy shifts impact businesses and products and how much supply chain reconfiguration is required both physically and financially, it is paramount to keep up with global international trade knowledge.
For example, China’s stringent COVID-19 rules and the food and energy shortages as a result of the Ukraine war has caused uncertainties on supply chains in the Indo-Pacific regions.
These new stressors placed on national and global supply chains have depicted that businesses will have to ‘strengthen resilience without undermining the benefits of rules-based international trade.’
When the elements of international trade governance are incorporated into the value chain, it helps businesses stay on track on other important policies that coincide with trade policies like geopolitical risks and environmental standards that need to be adhered to.
3. Understanding the impact of transportation-related factors
With greenhouse gas emissions and carbon taxes factoring heavily into ESG metrics, analysing, and reducing Scope 3 (extended value chain) emissions will remain a challenge.
It will be increasingly essential for companies (and their partners) to track and understand the impact of transportation-related factors – including emissions – on the overall supply chain to accurately report their carbon footprint, make smart trade-offs to reduce it, and help ensure business continuity.
Businesses need to be mindful of all emissions driven by operations and especially ensure they are adhering to their corporate commitment about emissions.
One way to ensure business continuity is by understanding the demand of products and then plan strategies to secure those supplies, manufacture them efficiently and reliably move all the components and finished products to the market that saves time and costs in a carbon-effective way.
By anticipating the transportation demands early, businesses can utilise that extra time to secure low-carbon carriers and navigate away from potential delays.
4. Rising costs of storage space rental
Warehousing and industrial rents have increased by around 15 per cent year on year. New South Wales has hit new highs as businesses engage in a bidding war for scarce space, with rents reaching more than $200 per sqm in some well-located industrial precincts.
E-commerce, 3PLs, food manufacturers and other warehouse-dependent sectors are all competing for the same spaces, and landlords are naming their price. To reduce costs would mean looking into alternatives like automation of movement of inventory throughout.
5. Increase in cybersecurity risks
Cybersecurity and risk management have always been vital for the flow of any business. However, the current condition of the global supply chain makes it exceptionally vulnerable to severe damage from an attack more so than usual.
As supply chains have become more complex, digitised, and interdependent, disruptions to their IT infrastructures have threatened cascading impacts for affected companies, depending on how interconnected the relevant suppliers and businesses are.
While Optus was a good consumer example, distribution hasn’t been immune with Toll having experienced multiple ransomware attacks for example. Organisations within the supply chain must take an active, focused-approach to cybersecurity to avoid crime-related delays, data breaches, and financial losses.
6. Rising fuel prices
With no end in sight to the war in Ukraine, fuel prices have increased and will continue to be unpredictable in 2023. This will partially be passed on to consumers, however carriers will bear the brunt of these costs and have to look for ways to reduce operational costs in other areas that technology may be able to assist with.
Building a resilient supply chain
Having a holistic, end-to-end view of the supply chain provided by an end-to-end platform will become increasingly crucial, however companies will only be successful if they have a detailed plan and a vision of the challenges they are trying to solve such as reduced lead time and decreased operational costs.
Investing in technology to access near real-time data and connectivity to all the interdependent entities will be vital so that companies can identify challenges quickly and collaborate with partners to address them.
By implementing a digital control tower, businesses can connect to data systems and generate information on the supply chain to minimise impacts on delays.
2023 will be the year of reinforcing strong systems, processes, and tech that will shelter companies from uncertainty, helping them grow into new regions, expand customer bases, and drive sustainable operations.
Staying cautious and alert to ongoing threats by being equipped with the right teams, strategy, valuable insights, and the most innovative and intuitive technology to minimise impact and mitigate costs, will give businesses the edge to build a resilient supply chain in an increasingly disruptive environment.
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