The increasing risks of supply chain disruption have many 3PLs considering strategies to build resilience to help guarantee service continuity for their clients. Here we share tips to help safeguard your 3PL warehouse against uncertainties and maintain continuity through a more resilient supply chain.
Assess External Vulnerabilities
Uninterrupted operations require the elimination of external vulnerabilities that interfere with continuity in your 3PL. For example, extreme weather presents an increasing risk of disruption in the supply chain, but controlling the weather is not an option. However, you can help maintain supply chain performance, for example, with improved visibility, so you understand where products sit in the supply chain when disaster strikes.
Understanding external vulnerabilities reduces the risk of economic loss, as when you understand vulnerabilities, you can plot a disaster response that starts moments after a disaster occurs. Vulnerabilities might include:
- Political upheaval
- Regulatory compliance changes
- Economic uncertainty
- Technology disruption
- Increasing or varying customer expectations
- Capacity constraints
- Globalized market forces
Each client has their own vulnerabilities — some supply chains feel a drastic ripple effect when disrupted, while others do not. More flexible supply chains can respond with less disruption, while more stringent networks can’t react as quickly when sudden operational changes are necessary. Therefore an assessment of vulnerabilities allows you to customize responsiveness to ensure all clients experience as little impact on their supply chain as possible.
Setting priorities by determining what is more important, the cost or response times, ensures the most critical steps are taken first. Some clients might have huge budgets and will prioritize quick delivery regardless of costs, while clients with lower budgets have to prioritize costs over response times. Your SLA helps dictate priorities for each client so that you can recognize their specific challenges.
For example, high-value product categories might find that it costs them more to face stockouts, so they are more willing to waive service level clauses that would impede your ability to maintain responsiveness in their supply chain. On the other hand, other products might focus on costs if demand is stable, and economies of scale allow you to maximize cost-effectiveness over responsiveness.
Risk awareness in the supply chain allows you to combine proactive risk management capabilities with reactive measures to pivot more effectively to resolve issues. Proactive management means you anticipate possible emergencies throughout the stages of the supply change and mitigate risks with a plan to overcome disruption as it occurs. You also need to have a balance of reactive risk management that allows you to remain flexible in your overall operations to build resiliency in less expected scenarios.
The combination will enable you to react quickly and minimize disruption internally. However, it must also consider external stakeholders such as manufacturers that must deliver parts or transportation service providers that need to continue deliveries of products. Risk awareness is critical to resiliency plans and should become part of your supply chain process.
Understand the Types of Disruptive Events
To remain resilient, you need to consider the two types of disruptive events:
Incident management identifies risks and introduces effective mitigation and controls to limit disruption should an incident occur. It also includes considering ways to prevent the recurrence of the disruption in the future. Monitoring events that impact your client’s supply chain allows you to set your crisis plan in motion to reduce the impact on operations.
Business continuity management plans for and deals with threats and hazards to business continuity. To create an effective strategy, you must evaluate business functions and how their disruption impacts the overall functionality of the business. This often includes crucial partnerships as well as how much impact discontinuing specific steps and processes will have on the supply chain. This ensures that the reactions are logically triggered by deploying the most critical actions first.
Understanding the most critical aspects of your supply chain helps you reduce the impact of disruption with an informed supply chain prepared to return functionality in priority order. Today, static practices must transform into dynamic responses better suited to integrated supply chains and complex networks. This will help reduce vulnerabilities and improve reactive tools needed to remain more resilient. For example, monitoring tools to track vulnerabilities allow 3PLs to activate their responses at the earliest warning signs.
Including event risk assessment in supply chain management designs helps address vulnerabilities most likely to lead to disruptions. As a result, you can help maintain continuity in the face of catastrophic events.
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