Understanding Supply Chain Resilience

Disruptions are quite common in our lives, be they personal or professional. A family’s life may face disruption due to the health problems of a member, loss of employment, or failure on any other personal fronts. Similarly, an organisation may face upheavals due to a government’s new economic policies that may result in loss of business. It could also be due to a breakdown of infrastructure, labour, or transport issues.

A society or nation may face disruptions when there is a sudden change of government, a change of economic policies due to terrorist acts, natural calamities, etc. The most recent example is the Coronavirus pandemic which had a global negative impact. Resulting in several millions of deaths (6.8 million is the current estimate by the World Health Organization) and debilities, it pushed the economies of several nations back by a couple of decades.

When the pandemic struck, families, organisations, and nations never expected it to reach such catastrophic proportions, and a Plan B was never in place to meet the calamities – human as well as economical. While some countries could handle the disaster better, some others just crumbled under pressure. The sheer scale of the disaster pulled them down.

What do successful families, organisations, and nations have in place that the others do not?

Resilience

The ability to quickly bounce back to form from a slump is resilience. In most cases, besides financial resources, those who have had an effective Plan B in place were the most successful in bouncing back to their previous form.

Such countries, organisations, or people could deal with illness, economic or governmental upheavals, and other negative pressures more effectively than those who did not. In other words, they were more prepared.

Resiliency in Supply Chains

Here, let us focus on the resilience of supply chains. From a true logistics and supply chain perspective, it is the ability to respond and recover quickly from shocks and disruptions to the business. Supply chain resilience is characterised by the preparedness of an organisation to meet sudden and disruptive events that affect its business performance negatively.

Having flexible contingency plans to counter such situations and quickly mobilise these plans is very crucial here. It is all about mitigating supply chain risks. Let us briefly take a look at some of the important disruptive factors affecting supply chain functions and how to deal with them.

Changes in Government Policies

The policies of a nation’s government need not always remain static. Dynamic nations and their governments often modify their laws and policies to meet their economic targets and improve economic output. This might include changes in taxation and surcharge laws that affect business, changes in the list of items that can be imported or exported, etc.

Changes in government policies on labour as well as transport have to be considered by business organisations as part of supply chain resilience. An example would be diesel-powered trucks commonly used in the transport of cargo. The various climate agreements between member countries are already looking at phasing out automobiles and machinery that use polluting fuels such as diesel. Some countries like the United Kingdom are considering stopping the sale of diesel and petrol automobiles by 2030.

Whether this is a workable solution to combat climate change remains to be seen. Still, it is also a fact that more people are moving towards vehicles that run on less-polluting fuels such as petrol or electric batteries. The retirement age for trucks and other automobiles that run on diesel is also being brought down, and the call for zero-emission models is growing louder by the day.

So, what next – especially for logistics and transport companies? A resilient approach calls for the need to come up with effective alternatives to confront such situations much before it becomes the law. Some direct and proactive outcomes are less-polluting electric-powered heavy vehicles, more effective cargo consolidation methods, sustainable packaging and packing, etc.

MARPOL and IMO

Similarly, the shipbuilding industry, and therefore cargo shipping in general, is under the watchful eyes of the MARPOL (International Convention for the Prevention of Pollution from Ships) and the IMO (International Maritime Organization). Scrubbers or Exhaust Gas Cleaning Systems (EGCS) are used to treat ship engine or ship boiler exhausts and remove harmful particulate matter and other discharges that cause pollution and damage marine life.

Laws to introduce new and effective ship scrubbers and EGCS that bring down these emissions significantly were introduced about two years ago as a result of observations by the above bodies. The shipbuilding industry needs to proactively keep up with technological research and developments to meet such requirements and mandates mainly aimed at reducing marine pollution.

They have to partner with organisations such as the MARPOL and IMO to develop newer and better technologies to combat marine pollution and avoid disruptions. Supply chain resilience can only be achieved with foresight and planning.

Infrastructure Breakdown

Like all plants and machinery, Material Handling Equipment (MHE) is also prone to breakdown. Unless an effective maintenance contract is in place that takes care of quick maintenance in the event of a breakdown of MHE, a supply chain organisation will face problems in fulfilling the demands of its customers.

Having standby machinery may not be viable for many organisations, especially small and medium-sized ones. However, they can enter into a contract with MHE operators to supply material handling equipment on a temporary, as-and-when-required basis. Contracts with service providers should also specify the 24 X 7 availability of technical staff to rectify problems.

Many logistics and supply chain companies have mutual contracts for temporary warehousing arrangements to meet capacity overflow situations. When companies frame their supply chain resilience policies, they must consider all these factors.

Labour Disruptions

A strong and reliable workforce is a critical factor in the smooth running of any logistics and supply chain operations. Labour unrest or absenteeism has to be foreseen. Backup plans such as outsourcing of temporary labour force can be put in place. The introduction of automation and robotics for handling materials also helps in addressing the issue of labour problems to a large extent.

Having an adequate quantity of buffer stock to tide over any difficult situation caused due to disruption of labour is a must for supply chain resilience.

Relationship with Governmental Trade and Transport Bodies

Supply chain organisations should have a good and effective relationship with the related government bodies to help in their seamless forward movement and growth. It helps organisations keep in touch with the pulse of the industry, and this is crucial for maintaining supply chain resilience.

In our country, for example, being aware of the import/export list published by the Director General of Foreign Trade (DGFT) and keeping track of changes helps organisations from adjusting their production line and quantities accordingly. Sometimes, an existing item might be removed from this list. Failure to follow this list and abide by such rules can have severe repercussions in the form of penalties or temporary suspension of export/import licenses, etc.

Challenges and Patterns of Doing Business

Each challenge that every supply chain faces may be unique. Organisations need to learn from these experiences and have systems in place for addressing them effectively in the future. New business patterns may emerge while balancing supply with demand during this difficult phase.

The dramatic growth of E-Commerce during the post-coronavirus pandemic period is a case in point here. Organisations have to use their resources effectively while facing these challenges. Supply chain strategies will have to be reworked and replanned at regular intervals taking into account market changes and other shock factors.

Having multiple suppliers instead of relying on a single supplier can help stock-out situations in many cases. Entering into supply chain partnerships with companies in different geographical areas can also help maintain uninterrupted supplies.

Modern technologies such as artificial intelligence (AI), the Internet of Things (IoT), and cloud database technologies provide businesses with the edge to confront disruptions while at the same time tapping into newer and better opportunities.

Supply chain resilience is an important factor in maintaining any business organisation’s market share and, therefore, its financial performance. It requires the holistic commitment of the entire organisation to foresee risks, resist them, and recover faster.

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Disclaimer: The author’s views expressed in this article do not necessarily reflect the views of Marine Insight. Data and charts, if used in the article, have been sourced from available information and have not been authenticated by any statutory authority. The author and Marine Insight do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendations on any course of action to be followed by the reader.

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About Author

Hari Menon is a Freelance writer with close to 20 years of professional experience in Logistics, Warehousing, Supply chain, and Contracts administration. An avid fitness freak, and bibliophile, he loves travelling too.