Nowadays, all supply chains face a plethora of potential threats, from piracy, to natural disasters, to accidents, to fraud, and so on. And with everything going on with COVID-19, we can safely add a global pandemic to that list.
In truth, there’s no real way to predict when and where these disruptions may occur, leaving businesses vulnerable and at the mercy of external forces.
For most companies, the ability to continue business operations regardless of what may be occurring externally is crucial. This rings especially true when you think about critical industries. So how do these companies stay afloat when a crisis hits?
More often than not, it’s their supply chain redundancies.
What is Supply Chain Redundancy?
Redundancy in this context means having excess capacity throughout the entirety of the supply chain to maintain functions and prevent a slowdown or shutdown in the instance of an unforeseen disruption. In simplest terms, it means having a backup in case something upsets the natural order of your supply chain.
Some of the most common forms of creating redundancies are having extra inventory, increasing the number of workers, and using multiple suppliers from different parts of the world. However, this list is certainly not all-inclusive; businesses can (and should) get creative to find what works best for them.
Redundancies help make supply chains resilient and stronger in the face of unforeseen adversity. Think about the global situation now with COVID-19. As per CEO John Monarch via SupplyChainBrain, any companies that relied solely on China were essentially without any means when China went into lockdown earlier this year. On the other hand, those that had warehouses and facilities spread throughout the world were able to bounce back relatively quickly. Ultimately, these redundancies not only helped them remain profitable but also gave them a competitive edge over any businesses that were single-source out of China.
One of the biggest drawbacks to creating redundancies is that they don’t come cheap. Obviously, having more workers or warehouses means that your overhead costs are higher. And when you think big picture, maintaining redundancies means that those funds are being used for a rainy day, so to speak.
Additionally, according to Paul Michelman at the Harvard Business Review, redundancy actually goes against the Six Sigma practices, which emphasize the importance of maintaining a lean and efficient supply chain. That said, Don Slickman at Supply Technologies argues that “redundancy is one of the best ways to ensure lean operations because redundancy is designed to help facilities avoid the significant waste of time, effort and money involved in a system breakdown.”
All in all, given all that has occurred due to the coronavirus pandemic, a lot more businesses are eyeing supply chain redundancies than ever before.
How to Find the Right Balance
When it comes to supply chain redundancies, there is not a “one size fits all” solution. Each organization must carefully analyze their own operations, strengths, and weaknesses before creating redundancies. As important as they may be, it’s equally important to ensure that you are creating them in a way that is both logical and cost-effective to you. Something that may work for a competitor might not be best for your business, so start internally first to see what makes the most sense.
And as we’ve seen, it’s not just about preparing for the threats you’ve seen, but making sure your supply chain is ready for whatever tomorrow may hold. Companies looking to create redundancies increase their chances of remaining afloat and competitive in the face of adversity. If you are interested in learning more about how adding blockchain to your operations can help create redundancy in your supply chain, get in touch with us.