Setting the scene

Uncertainty in supply chain management is a common phenomenon that affects every business regardless of its size or industry. But looking at today’s supply chains specifically, the scene looks a whole lot different than 2019, also known as: Pre-Covid.

For example, before Covid, shipping containers through ocean carriers was fairly predictable. But as Covid hit our planet at large, people where stuck at home, ordering more goods than they normally would, stressing an already fragile ocean freight system.

In the wake of Covid, rebooting the stuttering supply chains proved to be a huge challenge. And on top of that, the economy recovered faster than expected. The result was capacity problems for firms all over the world.

Looking back, this really brought forward the “weaker” links in global supply chains. Looking forward, the times won’t be getting more stable, so creating stronger links will be crucial.

Understanding the sources of uncertainty

First, let’s identify the different sources of uncertainty. There’s a range of factors to be considered, including demand fluctuations, supplier reliability, transportation disruptions or natural disasters. We will group them into three categories: demand, supply and operational. It’s important to understand the problem and have it defined clearly, if you aim to formulate an effective strategy.

1. Demand uncertainty

Demand uncertainty is fairly common in the supply chain and is a source of uncertainty that many companies are familiar with. Seasonal fluctuations, economic conditions, changing customer preferences or emerging trends require businesses to have a flexible supply chain that can respond quickly to changing demand patterns.

2. Supply uncertainty

Supply uncertainty is a very significant source of uncertainty. The logistics ecosystem of any given company has grown in complexity and on the supply side this type of uncertainty gave rise to challenges like supplier unreliability, communication issues, quality issues, and more. Mitigating supply uncertainty needs robust supplier management from rapid onboarding to harmonized communication.

3. Operational uncertainty

Every operational aspects of the supply chain, such as transportation delays, inventory management, and production disruptions can be source of uncertainty as well. Minimizing the impact of operational uncertainties comes from having visibility and control. Which translates into topics like real-time tracking of shipments, effective inventory management, and production planning.

Strategies for turning uncertainty into opportunity

We firmly believe it’s no longer about coming up with a plan not to suffer from uncertainty. It’s about building true resilience and being able to navigate and protect sustainable growth as the world around us continues to evolve at high speed. Strategies that enable you to build a proactive business are essential.

Develop a risk management plan

Or in other words, get down to identifying the various sources of uncertainty in your supply chain and their impact. Then, for each of them outline actions, contingency plans, alternative suppliers, and inventory management. But this isn’t an easy task.

According to Mckinsey, there are three reasons organizations struggle to progress significantly when coming up with a risk management strategy:

1. Supply-based transparency is hard to achieve. Modern, complex supply chains can have hundreds or thousands of suppliers contributing to a single product. So trying to identify every source of supply to assess risk is a massive undertaking.
2. The scope and scale of risks are intimidating. Trying to determine the chance something will occur as well as the impact it may have is just really difficult. Even more so given that next to known risks, there are unknown risks as well: weather or natural disaster, human error, etc.
3. Proprietary data restrictions limit visibility (and progress). In complex products, certain suppliers may consider their supply chains to be proprietary, limiting visibility at the purchaser or integrating-manufacturer level. And where visibility is hindered, it’s hard to assess risk.

Opportunity: Despite the difficulties organizations might face developing a risk management plan, it will be well worth the effort. There’s also a great opportunity in cultivating a risk-aware mindset across various teams and departments.

Improve visibility and communication

Visibility and communication are critical for effective supply chain management. It’s part of our Mileviewer credo. Organizations should strive for visibility over their entire supply chain, including their suppliers, distributors, and logistics providers.

Then, combining visibility with streamlined communication will allow for early identification of potential problems and fast correct action. This gives supply chain professionals more control and more tools as they try to minimize impact of disruption on their supply chain.

Opportunity: Building a logistics ecosystem that is actually connected will also create possibilities for better collaboration on certain risks, further deepening relationships with partners and exchanging knowledge and experience.

Leverage technology and data

We’re all physical actors in an increasingly digital world. And while shipping goods still requires a good deal of human effort, leveraging technology and data is the road to take towards resilient supply chains.

Many organizations are already facing digital transformation at high speed or are being confronted with choices like EDI vs. API integrations (even though it’s not an either-or question) to grow their business.

But there are so many solutions, systems and partners involved that making strategic decisions and developing a vision around supply chain and logistics technology will be a very important element in dealing with future uncertainties.

Opportunity: Technology and data can be ore drivers to build a truly connected logistics ecosystem and help mitigate risk by contributing to a resilient supply chain. Seize the opportunity to develop a vision around tech to make the right decisions and investments.

Resilience and beyond

Building a resilient supply chain is a very hot topic as organizations try to minimize uncertainty's impact on business operations and cope with current geopolitical circumstances. And while trying to cultivate resilience is a great goal, we shouldn’t forget that resilience isn’t just about being able to cope or “to survive”. It’s about embracing uncertainty, facing disruptions, taking hits, and having the necessary structures, processes, and people in place to bounce back quickly and keep growing at sustainable levels.

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