From Reactive to Proactive: Transforming Your Supply Chain Risk Management Strategy

Today’s supply chains are more precarious than ever, as everything from weather events to geopolitical tensions, tariffs and more can turn the tables in the blink of an eye. Most companies react to these issues as they occur, often resulting in lost time, shipment delays, operational disruptions, higher costs/added fees and revenue loss as a result. However, with margins already being thin, companies can’t afford to be reactive when it comes to their risk management strategies.

The key to reducing the impact of unforeseen events is to develop a proactive approach to risk management so that companies are prepared for issues before they strike rather than responding when it’s too late. With smarter planning, integrated services and proper technology in place, companies can minimize the effects of supply chain disruptions.

Understanding the Impact of Disruptions

When the Ever Given container ship blocked the Suez Canal in 2021, supply chains all over the globe experienced upheaval. Approximately 400 ships were waiting to pass through the canal by the time the ship was successfully freed. Every day for six days, more than $9.6 billion worth of goods remained tied up in one of the busiest trade routes in the world. It took months for supply chains to recover from delays resulting from having to wait out the crisis or re-route ships along much longer paths to avoid passing through the canal altogether.

This unexpected halt in operations is just one example of how vulnerable supply chains are and how quickly things can go awry. It also illustrates why reactive strategies no longer cut it when it comes to risk management. Rather than scrambling to find a path forward in the wake of the unexpected, modern companies need to take a proactive, tech-enabled approach to protecting themselves against disruptions before they occur.

What Does a Proactive Supply Chain Look Like?

Many supply chains today lack visibility across networks and rely on manual alerts and siloed data, resulting in lost revenue, unmet SLAs and reputational damage when things go wrong. However, with advance planning and the right partners in place, companies can take several steps to future-proof their supply chains and minimize the impact of unexpected events.

• Utilize real-time data: Gaining visibility into potential weather disruptions, geopolitical events and capacity updates in real time can help companies monitor some of the more common threats to their supply chains and ensure that they have time to prepare or pivot their strategies. Working to integrate systems and technology across the supply chain can also be beneficial by alerting all stakeholders of any issues or operational changes.
• Scenario planning and contingency modeling: Having a single path forward for supply chain operations leaves companies vulnerable to any unexpected issues that may arise. Companies that work to understand and train their teams about the types of issues they may eventually face — including weather events, natural disasters, traffic delays, geopolitical unrest, labor strikes and more — and have alternate plans and routes in place to respond have a much better chance of minimizing the impact of these events. Testing contingency plans in advance of potential issues can also help to ensure that any backup options are viable and that teams are experienced in using them.
• Understanding risk levels and identifying points of failure: Assessing current risk levels and making a point to identify weak points in a supply chain can help companies understand where they may need to focus time and resources. Diversifying suppliers, creating redundancies in your supply chain network and creating inventory cushions in case of future shipment delays can help to ensure continuity and improve resilience against disruptions.
• Use data–driven partners with supplier and carrier scorecards: Having partners in place that value the use of data and have frameworks in place to evaluate performance, manage relationships and foster collaboration across all stakeholders can help teams to make more informed decisions, understand what is expected of all parties involved and identify potential areas for improvement.
• Partner with a trusted 3PL: Working with a partner that understands the needs and goals of your business and operates as an extension of your team helps to create seamless operations while building trust. Look for a 3PL that offers a large network that can serve your customer base and has technology and data tools in place to provide visibility and communication to all stakeholders.

Supply chain disruptions can never be avoided completely, which is why it is critical for companies to be proactive in their risk management strategies in order to respond effectively. Becoming proactive requires a high degree of foresight and advanced planning, but it is essential when working to build supply chains that are resilient and capable of weathering the unexpected. Companies that get it right will stand apart from the competition; those who remain reactive will ultimately be left behind.

Reach out to our experts to assess your current level of supply chain risk and learn how we can help to bridge the gap and eliminate points of failure through a proactive approach to risk management.