The topic of supply chain risk management has taken on a new persona as the global supply chain endures the COVID-19 crisis. As explained by Aarian Marshall via Wired, the once-gridlocked cities across the country are rapidly draining stores of reserve stock and putting a renewed demand on truckers. Even locations that would routinely receive LTL shipments are now forced to compete with the biggest retailers for availability. In fact, spot rates for LTL are rapidly increasing across at least 63% of the country’s top 100 most high-volume truck routes. To curb further strain on the industry, shippers need to understand the challenges of traditional supply chain risk management software strategies, i.e., what caused the supply chain to crumble so quickly under the current crisis, how it must evolve to achieve responsiveness despite lean inventory management styles, and a few tips to improve risk management strategy going forward.
What’s Wrong With Standard, Traditional Supply Chain Risk Management
The problems with standard or traditional supply chain risk management revolve around its failure to apply data and look to the future. Moreover, organizations may fail to consider the full scope of the supply chain, including the public health of its employees and supplier relationships, reports ZipXpress.net:
“On top of this, any company should do their best to evaluate the health and reliability of their vendors and suppliers. This includes working closely with carriers who are shipping product and who are ultimately responsible for timely delivery. If they have a transparent process and take tracking and problem-solving seriously, they are a better carrier partner than those who provide no visibility and try to take a hands-off approach.”
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Supply Chain Risk Management Must Evolve in Modernity
Proactive supply chain risk management must consider the effects of suppliers and customers on your inventory and logistics strategy. As highlighted by the COVID-19 crisis, anything may contribute to a rush on stores and strain limited stock and result in severe disruptions. Unfortunately, traditional risk management focused on avoiding surplus and building lean strategies into the supply chain that would reduce sudden demand. But, when demand continues and fails to relent, it places a burden on truckers, logistics service providers, and other third-party entities.
The only solution lies in the rapid evolution of supply chain management to consider internal and externals data. Shippers need more than a single supplier, and they must find a way to build out logistics risk management strategy rapidly when necessary. In addition, proactive management of alternative modes, such as consolidation of parcels into LTL shipments, may open the door to additional capacity and help mitigate risks. Again, it all relies on data and your ability to apply such data.
How to Rapidly Improve Risk Management Strategies Through Software
Shippers would love to have a list of proven strategies to increase success of risk management, but that is not necessarily true. The best supply chain risk management software and strategy focuses on data, making decisions based on fact, not assumption. As a result, shippers should take these added risk management steps to rapidly improve their risk management strategy:
- Invest in a TMS.
- Connect your TMS to all downstream and upstream supply chain systems.
- Encourage supply chain partners to implement a similar TMS, if not the same one entirely.
- Avoid risky business relationships by always securing additional suppliers or vendors for back-up purposes.
- Work to reduce risk to drivers by encouraging appropriate measures, such as social distancing, when drivers are waiting or otherwise utilizing your amenities during loading/unloading.
- Apply data-driven analytics to understand trends in supply chain risks and how to avoid unnecessary exposure and maturation of such risks.
- Encourage customers to improve risk management by following all appropriate actions, including those laid out by government officials.
- Work to rate all shipments across all modes to secure the best rate and avoid a “run” on specific carriers or capacity.
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This is the ultimate time to put your supply chain risk management software to the test. If your supply chain continues to experience trouble in meeting basic order needs, it is time to consider upgrading your supply chain risk management software. Furthermore, apply the tips listed above, including rating all shipments, reviewing use of multi-modal shipping options, and working with carriers to secure available capacity. Successful risk management strategies will provide a protective effect for the next Black Swan supply chain disruption as well.