Building Supply Chain Resilience in Your Ecommerce Business
by Jaidyn Farar
For several years, businesses have been facing one supply chain challenge after another: rising freight rates and parcel shipping costs, transportation delays, material shortages, and more.
While supply chain disruptions are unlikely to decrease, your business can continue to thrive despite the issues it faces. By designing a resilient supply chain, you’ll be prepared to predict future disruptions, avoid many of them, and recover quickly from the rest.
A 2022 survey of 150 companies revealed that only 10% had all the resilience capabilities needed to thrive, while most of the remaining 90% could only react to crises when they occurred. To be part of the 10% of organizations that are prepared to thrive, you’ll need to gain end-to-end supply chain visibility, identify potential risks, and create plans for handling disruptions.
What is supply chain resilience?
Supply chain resilience is a business’s ability to quickly overcome supply chain disruptions using its existing resources. Resilience is largely achieved through flexibility and adaptability, communication (both internally and externally), data visibility, and partner diversification.
When an organization has a resilient supply chain, it’s able to do three things:
- Predict potential disruptions using accurate forecasting methods and tools
- Avoid being impacted by disruptions
- Overcome disruptions without a large impact to operations or customer experience
In 2024, supply chain resilience is more critical than ever. Most supply chains are complex and interconnected; a single organization’s supply chain can include suppliers, facilities, and customers located across the globe. Because of this interconnectedness, even small issues can have an enormous impact.
Supply chain disruptions can include the following:
- Inflation and other economic changes
- Labor shortages and strikes
- Natural disasters and extreme weather
- Changing market trends
- Shifting consumer preferences
- Geopolitical disruptions
- Cyberattacks
Before the COVID-19 pandemic, many organizations focused heavily on cutting costs, often using a just-in-time inventory strategy to avoid ordering excess stock. When the pandemic hit, the flaws of this approach were quickly revealed. Consumer demand skyrocketed, factories shut down, and transportation slowed, leading to costly stockouts for businesses. Since then, 97% of organizations have taken measures to boost resilience by increasing inventory, implementing dual sourcing, and regionalizing their supply chains.
Why supply chain resilience is important
Supply chain resilience allows you to protect your business from financial loss and customer dissatisfaction, but the benefits go beyond avoiding harm. With a more resilient supply chain, companies can focus more on innovation and growth, which gives them a competitive edge.
- Risk mitigation. Supply chains are one of the riskiest elements of a business. End-to-end visibility makes it easier to predict and avoid disruptions, minimizing risk and ensuring continuous operations during unexpected events.
- Cost efficiency. By anticipating and preparing for disruptions, you’ll avoid the high costs associated with supply chain breakdowns and emergency responses.
- Customer satisfaction. When production and distribution grind to a halt, it doesn’t just throw your internal operations into disarray—it also affects your customers. A resilient supply chain supports continuous product availability, leading to higher customer satisfaction and loyalty.
- Innovation and flexibility. With a more resilient supply chain, you have additional time and resources to devote to innovation and growth.
- Operational efficiency. Resilient supply chains optimize processes and resource allocation, improving overall efficiency.
- Supplier relationships. Building resilience often involves closer collaboration with suppliers. This collaboration strengthens partnerships, improves trust, and ultimately benefits both parties.
- Market responsiveness. A resilient supply chain allows companies to respond more quickly to changes in consumer demand and market conditions.
The bottom line? Supply chain resilience is necessary for business growth and success. Research has shown that on average, companies can expect to encounter supply chain disruptions lasting a month or longer every 3.7 years. Investing in resilience today might not have obvious results tomorrow, but it will certainly benefit you a few years (or months) down the road.
How can you build supply chain resilience? The next section will explore a few ways to get started.
How to build supply chain resilience
Building supply chain resilience can be costly and time-consuming—but it’s an investment that will pay dividends. The upheaval we’ve seen in recent years isn’t going away. To thrive, organizations must invest in resilience measures. The ones that do will be able to quickly recover from disruptions that leave their competitors struggling for days, weeks, or months.
Diversify your suppliers
Relying on a single supplier or geographic region makes your business vulnerable to disruptions like natural disasters, political instability, or logistical challenges. By establishing relationships with multiple suppliers across different regions, you’ll reduce the risk of supply chain interruptions.
In the past, businesses often minimized the number of suppliers they worked with to keep operations simple. But simplicity came with a price: the inability to respond promptly to issues. Depending on just a few suppliers only works in a world that’s socially, environmentally, and politically stable. In an unstable world, you need backup plans.
Get started with supplier diversification by assessing your current suppliers, including their strengths, weaknesses, and potential vulnerabilities. Then conduct thorough assessments of potential suppliers, establish contracts with backup suppliers, and maintain a database of alternative sources for critical parts or materials. Regularly review and update this network to ensure that you can quickly pivot if a primary supplier faces issues.
Reevaluate a just-in-time inventory approach
A just-in-time inventory (JIT) strategy involves ordering inventory only as needed, thereby minimizing waste from unsold inventory, saving money on storage costs, and maximizing cash flow. With a JIT approach, everything hinges on supplier performance. If suppliers face disruptions or delays, businesses can quickly run out of stock and lose sales.
If your organization uses a JIT inventory strategy, it could be time to consider a change.
With a just-in-case (JIC) inventory strategy, companies keep a buffer supply of inventory on hand, which provides more flexibility when incoming inventory gets delayed. This method has its downsides, including higher costs and the risk of products becoming obsolete before they can be sold. However, in a time when global shocks are common and often devastating, JIC allows businesses to effectively handle shortages and demand spikes without much change to operations.
Improve supply chain visibility
Supply chain visibility is the ability to track products during every stage of the supply chain, from manufacturing to final delivery. This includes not only understanding your internal processes but also understanding how your partner network operates. When you have visibility into your entire supply chain, you can anticipate disruptions, make data-based decisions, and improve processes to better meet customer expectations.
Unfortunately, many businesses don’t yet have end-to-end supply chain visibility. Fewer than half understand the risks their tier-one suppliers face, and only 2% have insight into the third tier and beyond.
To achieve supply chain visibility, start by identifying areas where visibility is lacking—the parts of the supply chain where data integration is weak. Next, map out your entire supplier network. Establish regular communication and data-sharing agreements with suppliers so you can understand their processes.
Logistics technology will allow you to collect and organize data. Using analytics software, you can gain insights from data from your order management system (OMS), warehouse management system (WMS), enterprise resource planning (ERP) system, shipping software, and more.
In your quest for visibility, remember to provide transparency to customers as well. Provide shipment tracking and updates so they know exactly when their orders will arrive.
Develop contingency plans
What disruptions could affect your business? And what will you do to handle them? Creating contingency plans requires you to answer both of these questions.
Start by conducting a risk assessment to identify potential vulnerabilities. Consider your suppliers, processes, and facilities, including your inventory management strategy. Take into account factors that affect your unique industry. For example, if you sell food or other perishables, your supply chain is particularly vulnerable to delays. If you sell electronics, you have to contend with short product life cycles.
Once you’ve determined the risks your organization faces, outline specific actions to take in the event of different types of disruptions. Assign roles and responsibilities within the organization, and develop communication protocols for quick response.
Remember, contingency planning doesn’t require mapping out every possible scenario. If you plan for a few key risks, your organization will develop the ability to bounce back from others. In an Unboxing Logistics podcast episode, Dr. Chris Caplice gives an example.
“[In the fall of 2019], a trucking company decided to do some contingency planning. They focused on one type of contingency they were worried about, which was the shooter at the workplace, someone coming in and just being off kilter. And so they said, okay, what would we do differently? They set up the communication plan. … Well, six months later COVID hit. And so all of those neural paths that they created, communication channels, they could just replicate.”
Chris continues, “You don't have to train for every possible outcome. The whole idea is, understand how you would set up for these different outcomes, and then you're getting the organization trained to be able to react.”
Enhance collaboration and communication
Maintaining strong collaboration and communication, even during times of supply chain upheaval, will help you recover much more quickly. In addition to internal communication, foster strong communication with all supply chain stakeholders, including suppliers, logistics service providers, and customers. This will ensure that all parties are aware of potential issues and can work together to resolve them quickly.
Better collaboration doesn’t just come in handy when things are going badly. During times of smooth sailing, communication helps foster long-term partnerships based on trust and mutual support.
Build flexible and agile operations
Creating flexible and agile operations allows your business to adapt quickly to changing circumstances and unexpected disruptions. Many organizations achieve greater flexibility by doing the following:
- Cross-training employees to perform multiple roles
- Maintaining a flexible workforce that can scale up or down as needed
- Investing in versatile automation technology
By embedding flexibility into your operations, you will better handle variability in demand and supply chain disruptions—and your customers will thank you.
Learn more about flexibility in our podcast episode: The (Flex) Factor: Mastering Flexibility To Get Ahead in Logistics.
Leveraging technology for supply chain resilience
Technology is a critical component of supply chain resilience. It serves several purposes: increasing efficiency through automation, reducing your reliance on human labor, minimizing errors, and providing visibility into your inventory, suppliers, shipping, and more.
Let’s take a closer look at some solutions and the role they can play.
- Artificial intelligence (AI). AI analyzes large datasets to predict disruptions and automate decision-making. It can be used in various areas of logistics, from inventory control to demand forecasting.
- Machine learning. Machine learning algorithms improve over time by learning from data patterns, helping organizations predict demand shifts, manage risks, and optimize operations.
- Industrial Internet of Things (IIoT). The Industrial Internet of Things connects sensors and devices across the supply chain, providing real-time data for monitoring. By providing immediate insight into issues like equipment failure or delays, IIoT helps prevent small issues from escalating into major disruptions.
- Additive manufacturing. Additive manufacturing, or 3D printing, allows for on-demand production of parts and goods. This ensures that production can continue even when traditional supply routes are compromised. Think of it as a potential inventory at your fingertips.
- Robots. Robots automate repetitive and labor-intensive tasks, increasing efficiency, precision, and reliability in warehouses and manufacturing processes. Using robots allows you to scale your workforce up or down depending on seasonal trends. It also reduces the risk of human error and keeps things running smoothly during disruptions.
- Modern databases. High-performance databases store and process large volumes of supply chain data, enabling real-time analytics and decision-making.
- High-performance shipping software. Advanced shipping software automates the shipping process, allowing you to create labels in a fraction of a second. This reduces delays, improves delivery accuracy, and helps maintain customer satisfaction.
- Blockchain. Blockchain technology allows for a secure record of all transactions of product movements. This provides transparency, traceability, and security.
- Digital twins. A digital twin is a virtual replica of a supply chain. It uses real-time data to simulate supply chain performance, allowing businesses to test different scenarios. Using a digital twin can help you make more informed decisions and respond quickly to disruptions.
- Forecasting and demand planning tools. These tools use sophisticated algorithms and historical data to predict future demand, helping companies manage inventory effectively and avoid overstocking or stockouts.
How to measure your supply chain resilience
An organization’s supply chain resilience is measured by three metrics: time to survive, time to recover, and time to thrive.
- Time to survive. Time to survive is the amount of time it takes for a supply chain node, such as a supplier facility or distribution center, to resume operations after a disruption.
- Time to recover. Time to recover is the amount of time it takes to fully recover your backlog and meet demand after a disruption.
- Time to thrive. Time to thrive measures the performance of your businesses before and after a crisis. The most resilient supply chains will improve after a disruption rather than continuing with the status quo.
Improve supply chain resilience with reliable technology
While some disruptions are difficult or impossible to avoid, others are in your business’s control. By using modern, reliable technology, your organization can avoid unnecessary interruptions in your warehouse operations.
EasyPost Enterprise is a suite of tech-forward logistics solutions backed by a team of expert engineers. Ideal for high-performance shippers, EasyPost Enterprise provides solutions for shipping, load planning and cartonization, data and analytics, and more.
Improve supply chain resilience with EasyPost—get in touch today.