Steps to boost supply chain strength in the face of continued disruption
At WTW, we’re continuing to hear significant concerns from food and beverage businesses on supply chain disruption. One experienced supply chain director recently told us they’ve seen as much disruption over the past two years as they have in the preceding 23 of their career.
This insight offers practical steps your food and beverage business can take to improve resilience against continued interruptions across chains. We focus first on modifications to your existing practices and refining current procedures, then consider ways you can make relationships with your suppliers work harder, before examining climate-related disruption and technology-driven means of ensuring your supply chain can adapt to continuing volatility.
Can you get to know your supply chain better? Identifying all of its vulnerabilities is the first step to making it stronger. Understanding the detail on key dependencies and then designing procedures to support continuity can have a real impact should a link in your chain break.
You can look for any gaps in your current processes by checking you have answers to the following questions:
The actions arising from the answers to these questions could include:
Greater collaboration between your risk, supply chain and procurement teams can make your supply chain hardier in tough conditions.
Working together can ensure minimum risk management standards are built into contracts with your suppliers, with procurement maximising the opportunities to push for more robust risk management when your negotiating position is stronger, such as ahead of authorising new suppliers or renewing existing contracts.
At these junctures, your risk team can support other functions in treating supplier risk management frameworks alongside procurement criteria such as quality and price.
As a starting point, teams can use a questionnaire to elicit suppliers’ risk and risk management information, asking for details on:
Other more complex factors likely to require you to engage more deeply include:
Open dialogue and in-person contact with key suppliers can prove vital to enhancing resilience. There is sometimes no substitute for seeing with your own eyes whether your supplier is following risk management and other procedures.
Visits and/or regular calls also allow you and your supplier to discuss challenges such as cyber risk and what it’s doing to stay ahead of ransomware attacks on manufacturers, for example. If they operate ‘dark' or fully automated warehouses, how do they protect operations against cyber attack?
You can also use conversations with suppliers to create and maintain a risk register specifically for supply chain risk. This can drive best practice in your business and theirs. You can apply frequency and probability ratings in the same way as for your own corporate risk register, using your supplier risk register to reveal areas for improved risk management. Can you identify project work to tackle specific vulnerabilities?
Climate change is already impacting the availability of certain crops, with droughts and floods causing severe damage and certain areas of the world predicted to become unsustainable for certain crops. For example, climate change could seriously impact global fruit production in coming years.1
How can you boost supply chain strength by looking at it through a climate lens? Getting the answers might begin by interrogating your existing risk register to see if the range of climate risks are being measured and monitored. You could also look to climate scenario analysis to get a deeper understanding of both the vulnerabilities and opportunities, for example, around engaging with alternative suppliers in territories less impacted by global temperature rises ahead of peers.
Further practical steps include nearshoring (transferring business operations to nearer territories to minimise potential climate-related disruption) or looking to domestic suppliers where possible.
We’re seeing more food and beverage businesses using digital systems to manage risk. Diagnostic software that generates a ‘digital twin’ for supply chains, for example, allows organisations to visualise, measure and monitor each element of the supply chain portfolio. These can use real-time intelligence to look at current risk assessments and linkages between supply chain components. They can also provide early warnings on approaching hazards, such as natural catastrophes or geopolitical issues, alerting you to call on alternative suppliers fast as required.
This type of supply chain planning software can also allow you to simulate and compare multiple scenarios quickly and effectively. You could explore a range of areas, from demand forecasting, resource and inventory optimisation, sales and operations planning, production scheduling to network design.
Supply chain digital twins can also help you assess and test continuity options before you need to activate them, further strengthening your planning around disruption.
For more expert help on making your food and beverage supply chain more resilience, get in touch.
1 Impact of Climate Change on Fruit Crops, Current World Environment Journal, 2022
