How to build a more resilient supply chain to avoid disruption

Supply chain resilience has become an integral contributor to profitability for businesses since the Covid-19 pandemic.

Congested transport hubs and lack of movement of supplies during this time led many businesses to consider how to make their supply chains more sustainable and resistant to disruption.

The Russian invasion of Ukraine placed further pressure on global supply chains and the movement of goods vital for our health and wellbeing, including food, and oil and gas. The dilemma of how to build resilience into supply chain models was highlighted again.

But why are supply chains so complex and how can businesses smooth out problems to develop robust, efficient, and cost-effective models that bring efficiency and, ultimately, profitability?

Why are supply chains so complex?

The global nature of modern supply chains naturally adds complexity to business operations, but changing consumer demand is also a driver for change in supply chain management

Multiple processes are typically carried out internally by a business before the supply chain is engaged. When combined with the systems and procedures that are required to be conducted up and down the supply chain, it is not surprising that disruption occurs.

Lack of supply chain visibility for its members can lead to damaging inaction, but also to the wrong actions unwittingly being taken

So how can businesses build resilience in their supply chains and logistical activities to reduce and better manage the disruptive events that create financial disorder and lost productivity?

How do you build a resilient supply chain?

Being proactive in managing supply chains

Being able to anticipate and get ahead of disruptive events is a key step for businesses in developing supply chain resilience – taking a holistic and long-term view of the issue and understanding supply and demand in their market.

This might involve sourcing alternative suppliers or managing inventory more closely, for example, but being proactive and anticipating potential issues can ease the negative impact of disruption when it happens.

Digitising the supply chain

Digitising the supply chain using advanced technologies enables businesses to meet the ever-increasing consumer demands for speed and delivery efficiencies whilst managing supply chain costs.

The high-quality data that is accessible via technology can also provide businesses with reliable results for ‘what if’ scenarios – for example, if the business changed its favoured transport method from road to rail or air to sea.

Considering supply chain finance

Supply chain finance can provide the funding to overhaul complex supply chains and improve their resilience. It benefits smaller suppliers but eligibility is based on the creditworthiness of larger customers, which makes it more easily accessible for all.

Smaller suppliers commonly suffer cash flow shortages when contracts and payments are delayed because of breaks in the supply chain. This type of funding bridges the gap between invoice submission and payment, and enables supply chain members further down the line to be paid promptly.

Benefits of a resilient supply chain

Operating resilient, cohesive, and sustainable supply chains can transform business success regardless of industry. It limits the disruption that typically leads to disgruntled customers and lost trade, and provides a strong foundation for business growth.

Every member of a complex supply chain benefits from taking the collaborative approach that is encouraged by technology. Solutions, such as digitisation and tailored funding, facilitate the building of a resilient supply chains.

Business owners can then anticipate where and when supply chain disruption might occur, get ahead of the problems, and operate more smoothly whilst maintaining critical cost-effectiveness.

Article written by Karl Hodson, UK Business Finance. Karl is responsible for helping businesses across the UK raise funding for a variety of purposes such as working capital, expansion and capital equipment. He has specialist knowledge of raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds and Government schemes.