Many companies learn from other industry leaders and apply their ideas to reach business success. In supply chain management, all eyes are on Switzerland. FM Global recently released its annual Resilience Index, and this European country came out on top.
The Importance of Supply Chain Resilience
For the past three years, the insurance company FM Global has been ranking countries based on their resilience to supply chain disruptions. That is, their scores are based on how well they bounce back from and adapt to interruptions. It is often said that the higher the risk, the greater the reward. This concept applies to supply chains in that the more complex they become, the more customers they can reach with increased efficiency. However, that leaves even more room for things to go wrong, and when disruptions occur, the consequences can be detrimental to the business.
According to Forbes, these threats can come in many forms, extreme weather and natural disasters among them. Supply chains also face potential for cyber crime, insurance cost spikes, food contamination or systemic vulnerabilities. These risks are amplified for companies that have a global reach. Beyond falling revenue, outcomes of a major disruption can include tarnished reputations and damaged shareholder value.
Therefore, it is crucial for businesses to integrate resilience in the supply chain. As the FM Global Resilience Index exemplifies, enterprises in some countries do this better than others.
Results From 2016 FM Global Resilience Index
Of the 130 countries reviewed by FM Global, Switzerland took the No. 1 spot for its companies' powerful ability to rebound from supply chain disruptions. What gave this country such an advantage? According to the report, Switzerland has an especially efficient infrastructure, and the locale is not likely to crash under fluctuating oil prices. Additionally, Switzerland partners with high-quality local suppliers.
The rest of the top 10 are:
Of course, it is not only the top-performers that industry leaders could stand to learn from. Reviewing ineffective practices from the worst-ranked countries can also reveal insight into how to create a more resilient supply chain.
Venezuela ranked last this year partly due to its exposure to natural disasters. Specifically, the country experienced both wind extremes and earthquakes, and its supply chains did not fare well under the disruptions. Local supplier quality was sub-par, and corruption was abundant. This exemplifies that sufficient resilience involves not only an efficient reaction to disruptions but also the ability to prevent them in the first place.
Building Supply Chain Resilience
The results from the FM Global Resilience Index indicate what makes a resilient supply chain: a sound infrastructure, positive supplier relationships and endurance to oil shock. But how can supply chains achieve those traits?
Booz Allen Hamilton offered several solutions, including identifying risks. According to the management consulting services company, adopting a holistic view allows supply chain management to see threats not just in certain facets of the process but in the supply chain as a whole. This requires collaboration among all stakeholders. Then, constituents must ascertain how critical each risk is and come up with a strategy to both prevent and prepare for these disruptions.
It is also vital to foster cohesive supplier relationships. This was, after all, a shared characteristic among top-ranked countries. Remaining transparent with suppliers and supporting collaboration is key to making these connections productive and effective.
Additionally, supply chain resilience requires the ability to trace items from start to finish. This is especially important among the food and beverage industry. Not only must this sector abide by strict food traceability regulations, but contamination also poses a serious risk to consumers. Optimal item tracing strategies allow companies to remove food from supply chains before any harm is done.
Data Collection as Resilience Solution
Data collection solutions can assist with nearly every tactic outlined above. In fact, a report launched by the Economic Forum indicated that greater supply chain resilience requires expanded use of data-sharing platforms.
In risk management, communication is key, and data collection allows for a seamless flow of information throughout the entire supply chain. This allows those in inventory management to ascertain whether there are too many items to safely store in the warehouse. It also provides opportunities for logistics to better arrange deliveries - a necessary strategy since climate changes often bring unexpected and severe weather.
Consider the benefit of data solutions to supplier relationships. As the Economic Forum report indicated, strong supplier relationships are key to maintaining supply chain resilience, and shared data can build trust and foster effective communication.
Data sharing can optimize more specific facets of supply chain resilience, like food traceability. According to the RFgen white paper, "Protecting Your Brand - The Food Traceability Survival Guide," a mere 52 percent of companies can carry out a recall within a few hours - a feat that is not only expected with modern technology but also a necessity to protect consumer well-being. Part of the hold-up may be due to paper-based data collection processes, whereas automated solutions would make this process more efficient. This impacts resilience in that supply chains can quickly mitigate risks, allowing more time to create prevention strategies moving forward.
Resilience is an integral component in supply chain management. Based on practices from the top-performing countries, it is clear that automated data collection solutions are a vital piece to the resilience puzzle.