Over recent years, supply chain resilience has emerged as a leading go to topic for supply chain professionals. But in reality, is the discussion matched with action? And consequently, is it getting the attention it deserves when it comes to strategic or organisational risk mitigation? After all, the recent highly publicised and unique to Australia IVF shortage is presented as a good case study on how a confluence of factors relating to demand and supply has led to a critical supply shortage. Which is concerning given IV fluid critical role in healthcare and even more surprising given the steps required to build a resilient and responsive supply chain are logical and achievable with the required focus.
To assist you on the journey towards achieving resilience, we’ve outlined (from the context of a key nutritional industry) the critical steps necessary to set you on the pathway. Have a read, sit back and then break down one area of your supply chain to consider how your own resilience systems stack up.
Step 0: Ensure Clear Accountability
Whilst achieving resilience is an organisation wide objective not being clear on who is responsible for setting up the necessary audits and systems would be considered the first step towards failure. In the majority of instances, supply chain and procurement would be two of the go-to parties.
Step 1: Identification of Critical Components
This involves pinpointing those parts of the supply chain that are essential for the production and delivery of goods and services. These components are often those that, if disrupted, would significantly impact the overall operation.
Key thought: The Dairy sector uses polyethene in blow-moulded packaging for 80% of all milk products. No packaging means no milk for your morning Wheaties or Chai latte!
Step 2: Risk Assessment
Evaluating the potential risks associated with critical components. This includes understanding the likelihood of disruptions and the potential impact on the supply chain.
Key thought: The recent exit of Qenos means Australia no longer makes the polyethylene that is a fundamental part of blow moulded packaging. All requirements now need to be imported from six major global sources, two of which are exposed to conflict zones. Do you dynamically revise your risk profile to adjust for structural changes?
Step 3: Prioritisation
Once critical components and risks are identified, they need to be prioritised based on their importance and the severity of potential disruptions. This helps in focusing resources and efforts to the most critical areas.
Key thought: Is it the milk carton or the cap or the label or the ‘Use by Date’ applicator that is the priority item? When determining prioritisation, it’s not always the obvious item that has the priority. Sure, the first three are essential to package the milk but without the capability to print the use by date on the carton it cannot be distributed. Hence the ink applicator also becomes a critical area for prioritisation.
Step 4: Mitigation Strategies
This is when you should be developing strategies to mitigate the identified risks. These can include diversifying suppliers, increasing inventory levels, investing in technology or investing in supply chain visibility platforms. Which one or combinations of these are right for you is highly dependent on the sector and the nature of the supply event.
Key thought: Simply put, the cows will keep the milk coming and, outside of pouring it down the drain or feeding it to livestock, any extensive polyethylene supply disruption in the dairy industry has immediate ramifications. Particularly as the extensive work required to reconfigure fill lines means that packaging alternatives are difficult and slow to turn. Consequently, mitigation for this industry should take the form of working with the blow moulders to diversify supply.
Step 5: Continuous Monitoring
Regularly monitoring the supply chain to identify new risks and ensure that mitigation strategies are effective. This helps in maintaining the resilience controls and adapting to changing conditions.
Key thought: When, as in the dairy sector, the producer base is geographically diverse, the necessity for continuous monitoring of the supply chain is both highly critical and also challenging to enact. Accordingly continuous monitoring needs to be conducted at an organisational level (it’s your responsibility) and at the industry body level (it’s part of their mandate to protect the sector).
Step 6: The Demand Review
One additional factor that can came into play and have an abnormal influence on supply chain resilience is that of demand. When the demand pattern changes but the parties responsible for understanding them have not picked up on the signals then shortages of critical items can occur.
Key thought: When there is a high turnover of personnel whose role it is to understand demand patterns then, the associated risk of under or over shooting demand forecasts is elevated. Systemising demand planning through the application of a formulised sales and operations planning model is a proven mitigation strategy.
Well, how did you go? Are you happy with your level of resilience? Want to know more?
Having worked extensively in the area of supply chain network design and sales and operations planning the Siecap team is well equipped to support you on the journey to building supply chain resilience. You can find us at Siecap.com.au or call 07 3157 4400 to be put in touch with our nationwide team.