The Pillars of a Resilient Supply Chain

With the sudden onset of the COVID pandemic last year, managing risk in your business took on a whole new meaning. The pandemic has completely changed the way we do business in the short term. It’s also likely to have a lasting effect on business operations.

One thing COVID taught us is the need for resiliency in business operations. Unusual circumstances can bring about unexpected costs that can affect your business. Adjusting to unexpected circumstances gives you an advantage, even in the post-pandemic world. The more resiliency you build into your supply chain and the more flexible it is, the more you’re able to accommodate whatever the future may bring and control costs.

Supply chains have already evolved over the last few decades, because of changes in technology, the geopolitical landscape and climate change. The pandemic has disrupted plans and is likely to continue to reshape optimal supply chain operations. As we begin to emerge into a post-COVID world, we’re likely to see even more changes, not only in supply chains, but also in the retail side of business.

Pillars of a Resilient Supply Chain

A recent trend toward more regionalized supply chains is expected to continue. This trend comes about not simply because of COVID or trade wars, but because many retailers now understand they need to be much faster to market in order to compete with Amazon and other eCommerce giants. A one-size-fits-all supply chain is becoming a thing of the past. Your supply chain needs to be able to adapt to each situation. 

You can optimize your operations by incorporating these five pillars essential to a resilient, sustainable supply chain: visibility, flexibility, collaboration, control (of data), and FX risk management. 

  1. Visibility refers to the ability to track and monitor supply chain events and patterns as they happen. With effective monitoring and tracking, you may even spot events or patterns before they happen. Having early warning of any potential issues gives you the ability to react and adjust, heading off potentially expensive situations.
  2. Flexibility allows you to adapt quickly in response to problems. When you’re not locked into certain procedures, you can change your operations without significantly increasing operational costs, which can also open your business to new opportunities. 
  3. Collaboration includes working effectively with supply chain partners through symbiotic relationships, helping you avoid disruptions and achieve common goals. Collaboration has become more important with the increase in multi-modal connectivity. Your product may traverse a territory using several modes of transportation, such as sea, inland barge, and rail, and even stop in a warehouse along the way. Collaborating with your partners allows this to happen smoothly and efficiently.
  4. Control is the technology to share data, as well as having robust policies, monitoring, and control mechanisms in place to help ensure the proper procedures and processes are followed. Technology is essential to today’s business operations.
  5. FX risk management can help smooth out financial bumps in the road. Incorporating hedging strategies like forward contracts, multi-currency accounts, and market orders give you a two-pronged approach to managing risk. You’ll reduce or potentially eliminate currency losses when the currency market moves against you, while locking in gains when the market moves in your favor.

Managing Risk in Your Supply Chain

As noted above, the global supply chain was already changing to adapt to our new way of doing business. During the pandemic, globalization—shipping raw materials to be manufactured or processed in a cheaper labor market—became less important.  Reshoring and nearshoring—moving manufacturing closer to or back to your home area—has become more important. 

Now that so many businesses need to compete with large eCommerce operations like Amazon, supply chain optimization and fast delivery becomes more important to maintaining profits. In addition, regional backup distribution becomes a priority in case of supply chain disruptions. Just-in-time inventory, along with just-in-case, helps businesses build a contingency plan so they can continue to meet customer demands. 

All of these activities are supported by increased use of technology and data sharing for more visibility, transparency, efficiencies, while protecting your profits with FX hedging strategies. When implemented together, these pillars become the basis of a solid risk management strategy for your overseas shipping operation. 

Prepared for Future Opportunities

In spite of the challenges of the last year, businesses have seen many opportunities as well. Implementing changes to optimize the supply chain helps you be ready to take advantage of opportunities and maintain profits in the post-pandemic economy. 

We live in a volatile world. No matter what happens, planned or unplanned, implementing these four pillars creates a resilient supply chain with the tools you need to be prepared for a wide variety of events. 

Ready to learn more from our award-winning trading team?



Juan Perez Senior FX Trader and Strategist Tempus

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