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Building supply chain resilience – what it means and why it matters

Building supply chain resilience – what it means and why it matters

18. February 2021
Supply Chain

The Corona pandemic has brought the topic of supply chain resilience back into sharp focus. Border closures, missing employees and disrupted supply chains are just a few of the examples that led to massive disruptions in logistics. In addition, hoarding, purchasing restrictions and closures in some areas repeatedly led to severe disruptions in demand.

However, even away from pandemics, a wide variety of environmental influences can have an immense impact on the supply chain such as natural disasters like earthquakes. If we look at Toyota for example, due to the earthquake in Japan in 2011, the company was still struggling with the consequences months later. Not only in Japan itself, but also in the USA and Europe. Political influences or cybercrime are also factors that can have a major impact on supply chains.

Apart from that, there are not only big disasters but also poor product quality, machine failure or supplier insolvency that are frequently cited as causes of disruption. Especially due to the increasing complexity of the supply chain, disruptions are steadily increasing. The consequences are bottlenecks, high costs, and in some cases even a threat to the company’s existence.

What does resilience mean and what constitutes a resilient supply chain?

The term resilience actually comes from the area of psychology, where it describes the ability to cope with stress and crises. This can also be applied to the supply chain. According to a study by Michigan State University, the resilience of a supply chain is defined by both the ability to withstand disruptive factors and the ability to recover quickly from the disruptions. For this purpose, resilience can be divided into four levels: Avoidance, Containment, Stabilization and Return. In other words, to what extent can disruptive factors be avoided in advance, how can they be contained, what helps stabilizing the supply chain, and how quickly can I return to everyday business?

Although there is no such thing as 100 percent resilience to all external influencing factors, there are nevertheless some factors that help to strengthen the resilience of the supply chain. One important factor, for example, is improving transparency. This is because “end-to-end visibility” along the entire supply chain improves not only the ability to control but also the ability to respond. And the faster the response to an impairment, the less impact there will be along the supply chain. However, there are also other areas such as logistics setup, near & offshoring, multi-sourcing or agility that play significant roles when it comes to supply chain resilience.

To learn more about these topics, we would like to invite you to our free webinar “What makes a supply chain resilient? – 5 blocks to make your supply chain more resilient”. In a 40-minute session, our speaker Christof Kluska will talk about why resilience matters, supply chain trends and about five blocks to improving supply chain resilience. Click here for more information. 

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