Operational excellence in the midst of supply chain disruption

Supply chains today are facing significant pressure from environmental, political, technological and regulatory disruptions like never before. One article highlights the top risks and risk score and risk score threatening today’s supply chains, including: 

• Climate change and flooding: 90% risk score
• Geopolitical instability: 80% risk score
• Cybersecurity threats: 75% risk score
• Raw metals and materials: 70% risk score
• Forced labor crackdowns: 65% risk score

Gartner states that the top five supply chain characteristics for future readiness are agility, resilience, regionalization, integrated ecosystems and integrated enterprise strategy. Yet only 29% of surveyed organizations have developed at least three of them, and these companies outperformed others significantly over the last year. It is impossible to mitigate every risk a supply chain may encounter, but organizations can seek to minimize risk and make educated risk decisions. In this ever-changing world, it is imperative that supply chains be agile, flexible, and resilient. 

Schneider Supply Chain Management® (SCM) provides superior consulting, visibility, and operational excellence to remove risk or minimize exposure if it cannot be avoided. You cannot predict how many Nor’easters may hit your supply chain, but you can ensure proper mitigation and agile recovery.

When a devastating hurricane made landfall in Houston, drastically affecting North American supply chains. A major production plant for one of Schneider’s customers was in the direct path of destruction and became inaccessible for two weeks. This inevitably meant a shift in its production and inventory, changes to routing guides, and complex logistical execution. During this crucial time, 25% of this customer’s supply chain network shifted and Schneider Logistics maintained an exceptional on-time pick-up and delivery of 95%. Schneider had a deep understanding of the customer’s supply chain to develop robust solutions and execute swift changes in business processes to safeguard service.

Risk and Insurance magazine notes that not one of 110 respondents rated their company as “highly effective” at supply chain risk management. “In fact the typical supply chain manager estimates that just 25% of their company’s end-to-end supply chain is being assessed in any way for risk.” 

A Supply Chain Assessment is a great starting point to uncover opportunities and diagnose your supply chains health. We utilize shipment level data to dive deeper to understand the structure of a shippers’ network, providing dynamic visualizations to identify:

• Cost-savings opportunities.  
• Efficiency improvements.
• A roadmap for implementation.  

To assess risk, we overlay weather-related events to identify potential vulnerabilities and visualize how these risks intersect with the supply chain network. This approach helps us understand:

• Where disruptions are most likely to occur.
• How multiple risks can compound non-linearly.
• The strategic implications of these risks.

As risks increase, so does the likelihood of disruption-often exponentially. That’s why it’s critical to have a data-driven model in place to guide next steps to reduce exposure and minimize cost impact. Ultimately, this leads to the need for network optimization and a resilient supply chain strategy that enables fast, informed decisions when disruption strikes.  

These comprehensive tools help to identify, prioritize and ultimately mitigate risk. But this is not a one and done approach. Because supply chains are ever changing, these areas of vulnerability and quantification of risk should be evaluated on a regular basis. Gartner notes this should include “end-to-end supplier risk as part of the ongoing governance structure and continuous improvement.”

Once risks are prioritized, mitigation strategies can be developed and assessed on an ongoing basis. Common mitigation activities include:

• Evaluation of suppliers and sourcing reviews that aim to swap out weak or risky suppliers with strong suppliers.
• Network analysis to shorten shipping time and/or cycle time of products by changing/adding warehouse locations or shipping locations.
• Increasing visibility throughout the supply chain by way of analytics, real-time shipment tracking and score carding carrier and supplier compliance. 

Schneider was performing a network optimization project for a healthcare customer when a tornado destroyed one of its distribution centers. Since this was a sterilized facility, all product was scrapped and it was imperative to begin fulfilling customer orders as quickly as possible. The customer had not assessed risk across the supply chain to develop contingency plans and needed a plan to mitigate the service inefficiencies and expected sharp increases in cost due to this natural disaster.

Schneider provided an operational plan within two days which included four scenarios. The customer’s initial plan would have cost $15.5M, a 37% cost increase. Schneider presented a strategy to change the location of order fulfillments which decreased the cost exposure for this customer to $1.5M, a cost increase of only 3.5%. In addition to moving forward with Schneider’s recommendation, the customer instituted a process to review and renew supply chain risks and mitigation plans on an annual basis.

Schneider helps customers assess and mitigate risk through:

• Supply chain assessments which identify potential problems and supply chain solutions to improve productivity, network velocity and savings.
• TMS and managed transportation services.
• Establishing improved business processes.
• Developing more resilient transportation routing guides.