Blog Posts Ready for Risk? 4 Strategies for a Nimbler Supply Chain
Key Takeaways
- The recent wave of supply chain disruptions is prompting greater focus on risk management.
- Retailers and brands need to identify and address potential vulnerabilities in their order fulfillment operations.
- Areas for improvement may include distribution network configuration, inventory management, postponement strategies and advance planning.
Supply chain disruptions ranked second for fulfillment operations’ peak season stressors in our recent LinkedIn poll. That’s hardly surprising, given the perfect storm of port congestion, product and component shortages, Omicron variant, labor shortage and delivery capacity issues.
Holiday shoppers encountered more than 6 billion out-of-stock messages for online products in 2021 – up 253% from 2019.
Source: Adobe Analytics
While we’ve put the 2021 holiday season behind us, it will be harder to escape the threat of business interruptions. Experts predict that supply chain risk will remain elevated in the year ahead – and quite likely beyond.
Many business leaders are recognizing their vulnerabilities and taking action to manage supply chain issues. According to Accenture research, the most common steps are ordering supplies earlier, creating new contingency plans (43%) and restructuring supply chains and inventory management processes (42%).
Reducing Risk for Fulfillment Operations
What can order fulfillment operations do to mitigate supply chain risk? Following are a few strategies to help prevent business interruptions.
Diversify
The COVID-19 pandemic has exposed the risk associated with housing an entire inventory in a single distribution facility. Government mandates and widespread infection can bring operations to a grinding halt. Natural disasters like hurricanes and forest fires can also threaten single-node networks.
To expand warehousing and distribution options, many companies are adding facilities in multiple geographies, so they can distribute inventory across multiple locations. If one DC is shut down, they can fulfill orders from a different source.
Utilizing multiple distribution centers (DCs) also gives you options in a tight labor market. You may be able to shift order volume to another location temporarily to avoid downtime and control costs.
Optimize Inventory
Product availability was a significant issue during the 2021 peak season. Holiday shoppers encountered more than 6 billion out-of-stock messages for online products – up 253% from 2019, new Adobe Analytics data shows.
That experience made an impact. When Digital Commerce 360 asked shoppers what would get them to buy more online in 2022, 43% of shoppers said improving in-stock inventory.
In order to deliver, many retailers and brands are considering a shift from “just-in-time” inventory to a “just-in-case” model – increasing their safety stock to minimize the impact of future supply chain disruptions. Strive to find the right balance to ensure adequate inventory to meet demand while remaining efficient.
To optimize inventory across multiple DCs, you’ll want to put the right systems in place. A robust order management system (OMS) will help you pull products from the best fulfillment source.
Explore Postponement Strategies
It’s also wise to think about when and where product reconfiguration and customization are handled. Moving these functions closer to the consumer can increase flexibility, improve responsiveness and mitigate risk.
For example, when an overseas manufacturer was unable to package the record of the month for Vinyl Me, Please during the pandemic, the record subscription company looked for help closer to home. Saddle Creek’s Charlotte DC stepped up to handle kitting and assembly for more than 50,000 orders in just two weeks.
Anticipate Delays
Remember you’re not the only company experiencing issues. Equipment manufacturers, for example, are also facing supply chain disruptions, resulting in exceptionally long lead times for forklifts, order pickers, etc. If you foresee a need, don’t wait until the last minute to seek out a solution.
With uncertainty likely to characterize our new normal going forward, the key is to stay nimble. Look for flexible fulfillment solutions that allow you to pivot effectively with short notice.
