Creating a Robust Mechanism through Supply Chain Diversification

“Establishing a broad network of suppliers across different regions to reduce dependency on a single source and mitigate risks associated with geopolitical or environmental factors will help companies wither the impact of unforeseen situations. In this regard, multi-sourcing would also prove to be beneficial wherein engaging multiple suppliers for critical components will ensure continuity in case one supplier faces disruptions. Moreover, creating regional distribution centers to support localized markets will enhance flexibility and reduce reliance on long-distance shipping,” emphasizes Lt Colonel Vijay Nair, Founder & Consultant, Saarthak Solutions, during this exclusive interview…

How can companies build the ability to withstand disruptions by using technology in order to shift from reactive to predictive risk management?

There are varied tech tools available which can help companies build the ability to withstand disruptions in order to shift from reactive to predictive risk management. These include:

• Predictive Analytics: Implementing advanced data analytics to anticipate risks by identifying patterns and trends in supply chain data. This will include Using AI and ML to develop predictive models that can forecast potential disruptions and recommend proactive measures.
• IoT and Real-time Monitoring: Deploying IoT devices to track shipments, monitor conditions, and detect anomalies in real time, enabling quick responses to potential risks.
• Digital Twins: Creating virtual replicas of the supply chain to simulate different scenarios, assess risks, and develop contingency plans before disruptions occur.

What are the strategies to diversify or regionalize supply chains?

This matter has become particularly imperative with the West Asia in turmoil, the South China crisis on the boil and various other unrests/ war in nearly all the continents.

• Supplier Diversification: Establishing a broad network of suppliers across different regions to reduce dependency on a single source and mitigate risks associated with geopolitical or environmental factors.
• Nearshoring: Moving supply chain operations closer to the point of demand to reduce lead times, transportation risks, and improve responsiveness. Government initiatives and sops for Make in India should help in this regard.
• Multi-sourcing: Engaging multiple suppliers for critical components to ensure continuity in case one supplier faces disruptions. This was a lesson well learnt during the pandemic times.
• Regional Hubs: Creating regional distribution centers to support localized markets, enhancing flexibility and reducing reliance on long-distance shipping.

What are the collaboration opportunities that technology can enable?

There are many collaboration opportunities that companies can leverage in order to strengthen their supply chains…

• Supply Chain Visibility Platforms: Implementing platforms that provide end-to-end visibility, allowing all stakeholders to monitor supply chain activities in real time.
• Blockchain: Using blockchain for secure and transparent transactions, improving trust and collaboration between partners by ensuring data integrity and traceability. Creating a shared data environment where suppliers, manufacturers, and logistics providers can access and analyse data collectively to optimize decision making.
• Collaborative Planning Tools: Leveraging cloud-based tools for joint planning, forecasting, and replenishment (CPFR), enabling better alignment and coordination among supply chain partners.

How can companies strike the fine balance between cost efficiency with the need for resilience?

There are many ways that facilitate companies in striking the right balance between cost efficiency and resilience. Some of them are:

• Cost-benefit Analysis: Regularly assessing the trade-offs between cost saving initiatives and potential risks, ensuring that cost-cutting does not compromise the supply chain’s resilience.
• Strategic Inventory Management: Maintaining a balance between lean inventory practices and safety stock levels to ensure availability during disruptions.
• Flexible Contracting: Establishing flexible contracts with suppliers that allow for adjustments based on market conditions and demand fluctuations.
• Investment in Automation: Automating repetitive and manual tasks to reduce operational costs while enhancing the agility and resilience of supply chain processes. I will add a word of caution that automation is to be done as per need and not under the concept of “We should also have it”. If automation systems are not optimally used, this could be a drain on costs/ RoI.

What are the ways to mitigate cyber threat?

• Cybersecurity Frameworks: Implementing robust cybersecurity frameworks and protocols to protect against data breaches, malware, and other cyber threats.
• Regular Audits and Assessments: Conducting regular cybersecurity audits and vulnerability assessments to identify and address potential weaknesses in the supply chain’s digital infrastructure.
• Encryption and Secure Communication: Using encryption for data transmission and secure communication channels to protect sensitive information across the supply chain.
• Employee Training: Training employees on cybersecurity best practices to prevent phishing attacks and other human-cantered vulnerabilities.

What are the sustainable or ESG measures that organizations can take related to risk management?

• Sustainable Sourcing: Prioritizing suppliers that adhere to environmental, social, and governance (ESG) criteria, reducing risks associated with unethical practices and supply chain disruptions. Costs would be a deciding factor; however, companies will need to place the environmental responsibility above costs to meet this end.
• Green Logistics and Circular Economy Practices: Implementing ecofriendly transportation and warehousing practices to minimize the environmental impact of supply chain operations. Easy aspects like, solar power, Skylight roofing, battery operated equipment, paperless operations, use of recycled paper/ packing material etc are low hanging. Adopting circular economy principles, such as recycling and reusing materials, to reduce waste and mitigate risks related to resource scarcity and regulatory compliance
• Carbon Footprint Monitoring: Using technology to monitor and reduce the carbon footprint of the supply chain, aligning with global sustainability goals.