How to Prepare for the Unexpected
Disruptions are part of our world. Weather, labor strikes, materials shortages, and demand spikes or valleys are simply part of doing business. High-performing supply chain organizations are differentiated on how well they respond to the unexpected.
Moments when things don't go well should remind anyone involved in the intricate and complex supply chain process to never take your foot off the pedal of continuous improvement. When the supply chain works, companies succeed. When they don't, no one is happy.
For transportation and logistics companies that manage the last mile of the supply chain, hiccups cause more than headaches—they cost money. Supply chain disruptions can have a significant impact on a company's profits, contributing to a loss of as much as seven percent, reports a 2013 World Economic Forum study.
Responsive or Reactive?
When teams embrace the reality that something will happen to interrupt best-laid plans, they can prepare. Smart logistics procurement teams have learned awarding business to the lowest bidder isn't the best strategy. It might look good on paper, but when something goes wrong, teams often end up paying exorbitant fees or scrambling to replace the supplier when supply is at its lowest and demand is at its greatest.
The best-in-class model recognizes collaborative relationships with suppliers, built on intelligence and transparency, provide the foundation needed to work together—both when things go well and when they don't go so well.
Withstanding What May Come
A proactive stance starts with harnessing the power of technology and category expertise to build strong sourcing models for managing the complex global delivery of goods.
Integrated technology platforms bring innovation in spend analysis, e-sourcing, contract management, sourcing optimization, and supplier value management to help teams get the answers they need to fine tune logistics strategies.
Make sure to ask the following questions:
- Who are we spending with, how much, and where are they located?
- Are there other suppliers who we might engage to reduce risk?
- Which suppliers have demonstrated a commitment to working with us on potential obstacles and ways to resolve them?
Once they establish a clear picture of supply chain partners, logistics procurement teams can design and implement the sophisticated strategies necessary to navigate the vagaries of consumer demand, market conditions, and unexpected disruptions.
Some examples of these strategies include:
- Using routing guides, developed through sourcing initiatives for both carrier selection and price, to track and enforce compliance.
- Identifying emerging lanes to ensure freight pricing remains competitive even as the network changes.
- Working closely with carriers and internal stakeholders to minimize unnecessary expenditures driven by costly surprises.
- Monitoring carrier performance and improved service levels carefully to avoid expediting and other costs.
- Continuously improve data consistency to drive even more value from future sourcing initiatives.
Plan to Collaborate
With a collaborative approach that effectively manages and measures logistics suppliers, teams can rest easy when challenges present themselves, and be confident that the procurement team and its logistics partners are ready to rise above.