Business and supply chain leaders are under tremendous pressure to ensure that their often widely distributed sources of supply remain operational and resilient. Breakdowns within a company’s supply chain can impact its day-to-day operations, customer experience, brand reputation, and financial stability. Thus, fortifying their supply chains is a strategic priority for companies in numerous sectors. Those that understand the span of strategies and tactics for better managing and strengthening supply chain operations are in the best position to not only weather potential challenges but also streamline their supply chain management in ways that give them a competitive advantage.
15 Ways to Strengthen Your Supply Chain
Nearly 80% of organizations experienced supply chain disruptions in 2023, according to the “Supply Chain Resilience Report 2024” published by the Business Continuity Institute (BCI). And McKinsey & Company’s latest “Global Supply Chain Leader Survey” places that number even higher, with 9 in 10 respondents reporting supply chain challenges in 2024.
As supply chains have grown more globally dispersed, they’ve also become more brittle in the face of changes in supply or demand. Signs of potential issues or weakness include suppliers missing deadlines with no explanation, decentralized decision-making about supply, limited visibility into supplier performance or spending, and leaders who are myopically focused on tactical, short-term supply chain decisions. These red flags suggest a need for upgrading supply chain processes, technologies, and management skills.
Consequently, it’s imperative for organizations to strengthen day-to-day processes and plan how to mitigate the risks of supply chain disruptions. The following are a range of high-impact supply chain best practices companies can take to solidify their supply chain networks and operations.
1. Monitor Industry Trends and Market Shifts
One sensible approach for any company seeking supply chain improvements is to keep close tabs on what’s happening within its industry and marketplace. Though that may seem obvious, factors can change suddenly, and understanding how these shifts will impact supply or demand is not always simple to determine.
Collecting and analyzing the right data and insights is the first step to effectively monitoring industry trends and market changes. Historical data can be helpful in identifying patterns or trends of the past, but they are just one piece of the puzzle. Taking into account quick or unexpected changes in economic conditions, geopolitical situations, weather forecasts, or competitors’ moves that can disrupt supply chains is also important. Companies that work closely with their suppliers and customers can help ensure that they have a good read on critical factors, such as supplier capacity, constraints farther upstream, and market demand. Forecasting software built to analyze relevant data can streamline and improve the accuracy of insights into the demand side, while supply chain management systems offer visibility into the flow of raw materials and goods through the end-to-end network of supply.
2. Strengthen Supplier Relationships
Organizations should be judicious about contracting with reputable partners capable of nimble problem solving to ensure the smooth flow of raw materials, parts, or goods when situations suddenly shift. Indeed, good supplier relationships can be the x factor that elevates supply chain management from a tactical function to a strategic advantage. Companies that focus on building and maintaining strong, trusted, mutually beneficial relationships with their supply chain partners are usually better equipped at responding to changing conditions while taking advantage of emerging opportunities.
The building blocks of solid supplier relationships include clear and regular communications, explicit expectations, mutual trust and consideration, and frequent reviews of performance and marketplace conditions. The more in sync a company is with its key suppliers, the more effective it will be at getting ahead of issues and benefiting from new business opportunities. A solid supplier relationship is not necessarily one that is without conflict or trouble; what makes these partnerships work is the parties’ willingness to collaborate, whether times are good or bad. Of course, it’s also important to know when to end a supplier relationship that’s no longer serving its purpose. Regular supplier assessments and reviews of new supplier options are prudent.
3. Diversify Sourcing Strategies
Breakdowns in supply chains have become a fact of life for many companies. Port congestion, supplier performance issues, and geopolitical turmoil are just a few situations that can bring a company’s operations to a crawl or even a screeching halt.
One way to mitigate these supply chain risks is to diversify supplier sourcing. This may mean contracting with additional suppliers when a primary supplier underperform, diversifying the supply base geographically, or seeking out more local suppliers to limit the logistics issues that can gum up the works.
Multisourcing—or contracting with multiple suppliers—ensures that a company is not relying on a sole source for a specific need and, therefore, is putting itself at risk of a single point of failure should supplier issues arise. Nearshoring is the practice of sourcing raw materials, parts, or finished products closer in proximity to the company. Although offshoring has long offered the benefit of lower costs, some of those labor arbitrage benefits have decreased over the years. In many cases, such savings may now be outweighed by the risks of relying on a supplier halfway around the globe. Keeping sourcing nearby typically means shorter lead and logistics times, lower shipping costs, and potentially fewer supply chain security and safety issues. It may also afford the opportunity to engage in more frequent management oversight of quality-control issues.
4. Establish Inventory and Capacity Buffers
Companies that keep additional resources or inventory on hand can minimize disruptions to their supply chains, allowing them to continue operating and meeting customer demand even when trouble arises. Inventory buffers, also called safety stock, are extra volumes of inventory kept on hand to deal with sudden increases in demand or supply chain issues. Companies can analyze demand patterns and monitor existing inventory levels to project future variability and optimize the levels of additional inventory to keep in stock.
Capacity buffers refer to additional resources, such as labor, machines, or space, that are kept on hand for sudden spikes in demand or supply chain disruptions. Companies can operate with a certain amount of extra capacity in place in case demand increases. They can identify bottlenecks to open up additional capacity and they can set up more flexible options, such as contract labor or logistics partners with the ability to scale up or down as needed to put such buffers in place.
5. Optimize Inventory Management
Companies need to manage their inventory in ways that can flex with shifting supply and demand situations. They must weigh the cost of keeping excess inventory in stock—thereby tying up capital—against the potential impact of running out, which can lead customers to purchase elsewhere.
A robust inventory management strategy is essential. Investing in an inventory management system, which may exist as a module within an enterprise resource planning (ERP) platform, offers companies real-time visibility into inventory levels at various stages from receiving to warehousing to shipping. Such software should include analytics capabilities to help company leaders and managers oversee and optimize inventory levels based on anticipated conditions. These systems can help support demand forecasting, create automatic reorder points, and allow for inventory control. The goal is to improve inventory availability so there is enough stock from suppliers for business-as-usual operations while avoiding paying too much in inventory carrying costs, which can be significant.
6. Improve Logistics and Transportation Strategies
In recent years, the news has been chock-full of logistical nightmares impacting supply chains, including port congestion, blocked or impassable waterways, container shortages, and price hikes. Logistics and transportation delays and costs can significantly endanger supply chain health, affecting the delivery of necessary raw materials, parts, components, and finished goods.
Anything a company can do to optimize transportation routes or schedules can facilitate delivery times, decrease shipping costs, and ensure that the business has what it needs to continue to operate and meet customer demands. Technology to track shipments and dynamically adjust logistics strategies can go a long way toward easing the impact of any snarls along supply chain networks.
7. Leverage Technology and Automation
The average supply chain involves so many moving parts (literally and metaphorically) that technology becomes mandatory to minimize human error, increase visibility, enable collaboration, and improve supply chain performance. Automating supply chain workflows from warehousing and inventory management to specific supply chain and supplier management processes can increase efficiency, lower costs, and reduce risks.
Companies can implement a variety of technologies to streamline and strengthen supply chain operations. For example, those that invest in ERP platforms benefit from greater visibility across their supply chain operations, which gives them an advantage in identifying and addressing inefficiencies or issues before they become bigger problems. Companies can also track inventory in real time, automate order management, and set automatic reorder points.
In addition, a good ERP platform will offer a selection of modules capable of proactively managing a supply chain, including options such as offering warehouse, supplier, and inventory management; demand forecasting; and customer relationship management. Because these functionalities are integrated within a common platform, companies are privy to more timely and accurate information with which to make decisions. Integrating and analyzing manufacturing and sales data, for instance, can enable those teams to collaborate and, ultimately, provide customers with clearer information on order fulfillment and delivery. Advanced analytics also provides leaders and managers with data-driven insights into anticipating supplier and customer behaviors so as to optimize procurement, inventory management, and production.
Some newer technological capabilities can further fortify supply chain management. These include IoT and RFID tags to streamline production and improve tracking, blockchain to secure data sharing with partners, and artificial intelligence and machine learning to optimize demand forecasting and inventory management.
8. Use Data Management for Risk Mitigation
Digitizing and automating supply chain processes can revolutionize supply chain management. In fact, data-driven intelligence is essential for companies looking to remain agile and competitive in a dynamic marketplace.
Embracing digitization empowers supply chain managers to respond rapidly to changing market conditions. The resulting data provides significant insights that can mitigate supply chain risk while improving inventory management, demand forecasting, supplier relationship management, and process improvement. For example, good supplier performance data management helps supply chain leaders ensure that partners adhere to industry and company standards, comply with necessary regulations, and meet agreed-upon service levels and product quality standards. Sound data also underpins more effective sourcing decisions, production planning, and process optimization.
And with the advent of advancing AI capabilities, companies can employ predictive analytics to anticipate trends in customer demand, optimize logistics and transportation planning, respond to rapidly changing economic conditions, and get ahead of supply chain disruptions before they inflict a larger toll.
9. Enhance Risk Management and Contingency Planning
Even the best-laid supply chain plan will eventually need to flex to accommodate unanticipated supply or demand shifts or shocks. Effective risk management requires companies to identify possible risks, categorize them by likelihood and extent of impact, and develop documented contingency plans. This process involves complete supply chain visibility, starting with raw material suppliers and extending to customers’ purchasing and buying trends, in order to identify issues in time to address them. Contingency plans could call for invoking a contract with backup suppliers, making changes to logistics plans or delivery routes, or adjusting production lines. Although certain scenarios, such as a pandemic-related shutdown, may be unavoidable or unsolvable, many potential supply chain disruptions and risks can be mitigated through forethought and planning.
10. Increase Supply Chain Visibility and Transparency
The more visibility a company has into its supply chain, the better it can guard against disruption and disappointment. The ability to view and track goods as they move throughout the supply chain empowers companies to respond to issues in a timely manner.
While simple in concept, it’s anything but. With today’s global and dispersed supply networks, seeing what’s happening further upstream beyond tier 1 or tier 2 suppliers is hardly a given. But that situation may be starting to shift, as an increasing number of companies look deeper into their supply base for help with planning and decision-making. Tier mapping is growing in popularity, with 17.1% of organizations able to analyze their suppliers down to tier 4, according to the BCI report on supply chain resilience. That’s up from just 3.7% reporting this ability in 2023.
Working closely and sharing data with the partners in a company’s value chain—key suppliers, manufacturers, distributors, and retailers, for example—can yield greater end-to-end transparency, collaborative problem-solving, and the ability to address challenges, thereby smoothing supply chain operations. Implementing advanced analytics and AI to better predict customer and supplier behaviors can also help strengthen supply chains.
11. Promote Sustainability and Regulatory Compliance
Many customers expect the companies they work with to operate in a sustainable and socially responsible manner. What’s more, companies today must comply with an increasing number of regulatory requirements regarding the environmental and social impacts of their business operations.
A company’s supply chain and logistics network can have an outsized impact on its overall sustainability, so environmental and social impacts become an important part of the equation when selecting suppliers and managing the supply chain. That means calculating the net impact of a product’s supply chain journey, and seeking partners throughout the supply chain that prioritize sustainability, waste reduction, and social responsibility. Auditing suppliers’ performance is also critical. The ultimate goal is to minimize the supply chain’s environmental impact due to energy usage, water consumption, and waste production while maximizing its positive impact on nearby people and communities.
12. Invest in Workforce Training and Development
A supply chain is only as effective as those charged with managing it, be they the leaders at the top, the logistics and inventory managers, the warehouse workers, or the order fillers. Providing proper training and development to explain a company’s new standard operating procedures, for example, can help ensure greater efficiency, consistency, and effectiveness in decision-making and day-to-day operations.
It’s critical, for example, that everyone understands the importance of supply chain visibility, working collaboratively with suppliers, and risk mitigation and contingency planning, for example. Providing ongoing education in these areas helps to ensure that everyone is equipped with the skills, technology understanding, and expertise necessary to strengthen supply chain operations.
Another specific area worth investing in is digital transformation know-how. According to McKinsey, 90% of supply chain leaders say their companies lack sufficient talent to meet their digitization goals. And for manufacturers and other companies dealing with significant labor shortages, training and cross-training are particularly important for developing a workforce with the flexibility necessary to respond to frequently changing conditions and likely disruptions.
13. Balance Efficiency With Resilience
One point that became starkly evident during the pandemic was the potential downside of overfocusing on cost-effective supply chain operations. Long, lean supply chains proved fragile in the face of sudden shocks to the system.
Strengthening a supply chain in today’s dynamic business environment requires striking the right balance between supply chain efficiency and supply chain resilience. When the scales tip too far in the direction of efficiency, the system has less slack to cope with a sudden increase in demand or an unexpected shortage of raw materials. It can also leave companies at risk of quality issues. On the other hand, prioritizing resilience can result in a sharp rise in costs, for reasons including carrying extra inventory and having to manage multiple vendors. In either case, the customer experience could be compromised.
Companies that can harness data and analytics to strike a reasonable balance among efficiency, effectiveness, and resilience will be best positioned to meet customer demands, while also protecting their profit margins.
14. Track and Analyze KPIs
Monitoring supply chain performance is essential to both the efficiency and profitability priorities mentioned above. Determining which key performance indicators (KPIs) to track, and then collecting and analyzing them, helps companies measure the strength of their supply chain performance, identify areas for improvement, and make any changes necessary to achieve those goals.
Tracking and analyzing KPIs is also vital for determining how well efforts to strengthen the supply chain—whether that’s investing in new technology, automating processes, or developing more collaborative relationships with suppliers—are delivering desired outcomes. Various metrics are commonly used to measure supply chain performance, such as inventory turnover rate, cash-to-cash cycle time, and perfect order rate. But the KPIs a company chooses to focus on will depend on its priorities and supply chain transformation efforts. Most ERP and supply chain management systems offer analytics tools and data-driven reports to provide helpful insights as companies seek to strengthen their supply chains. Leaders may also find that they need to expand beyond traditional supply chain performance metrics, such as cost per unit, and explore more advanced KPIs, such as those that capture complex interdependencies, customer-centric outcomes, and proactive risk management.
15. Commit to Continuous Improvement and Innovation
Improving the supply chain is not a one-and-done exercise. Shifting market trends, changing economic conditions, and ever-advancing technological innovation require companies to constantly improve their supply chain management approach. Supply chain performance should be reviewed and strengthened regularly. This requires ongoing analyses of internal and external conditions and data, coupled with an openness to change and innovation.
One way to approach continuous improvement is to create a group or governing council devoted to solidifying the supply chain so that this remains an ongoing organizational priority. This team will be responsible for ensuring that the company’s supply chain keeps pace with changes in the marketplace, while remaining aligned with overall business strategy. They can also regularly review supply chain policies and procedures to promote ongoing efficiency, effectiveness, and regulatory compliance.
Some actions to put on the continual-supply-chain-improvement agenda include regular check-ins with suppliers and customers to gather information, building and strengthening those relationships, and staying on top of emerging issues or opportunities. Fostering a culture of continuous improvement is also key. Creating mechanisms for those who work on the supply chain front lines to provide input can result in valuable improvements or innovative ideas. Keeping tabs on external impactful factors, such as weather or labor strikes, is also important. So is regularly reviewing, testing, and revising continuous improvement contingency and business continuity plans.
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Take Control of Your Supply Chain With NetSuite
One of the best tools for strengthening the supply chain is purpose-built software that offers the visibility, tools, and automation capabilities to support data-driven decision-making and bolster day-to-day supply chain management. NetSuite Supply Chain Management tracks supply chain processes from end to end, beginning with initial contact with new suppliers and proceeding to receiving, production, and final product delivery to customers. The solution enables managers to track supplies, schedule human and machine resources, and collect accurate data every step of the way. Leaders can use the system’s demand planning and forecasting tools to proactively address emerging issues on the supply or demand side of the system.
Some key features that can be used to strengthen supply chains include supply chain planning (the ability to analyze demand, determine replenishment requirements, add stock, and create orders based on an up-to-date supply plan), supply chain execution (the ability to optimize supply chain assets, control costs, and get products to customers on time, on budget, and to specifications), and mobile functionality.
Because NetSuite’s supply chain solution is integrated into its cloud-based ERP system, companies benefit from an up-to-date view of supply chain performance in the context of the business as a whole. Everyone, from production and procurement to finance and human resources, has access to the same real-time information, be it production data, financial reports, inventory, or outstanding orders. And because the software is scalable, it can grow with the business to help managers and leaders address new supply chain challenges as they arise. The result? Reduced risks, improved cash flow, and increased profitability.
Strengthening the supply chain takes effort; every company must determine the right approach to improve operations, risk management, customer satisfaction, responsiveness to global supply shifts, and competitive edge in the marketplace. Many strategies have proven valuable, but they also require investments of time, money, and talent. They demand an openness to change and new ways of operating. And, perhaps most important to remember, bolstering the supply chain is not a one-and-done initiative; companies that see the most impact from these efforts take a continuous improvement approach to their supply chain operations.
