The strike by U.S. East and Gulf Coast dockworkers continues to remind manufacturers that significant disruptions to their supply chains are the new normal.
The labor action, driven by demands for higher compensation and protections against automation, has already started to ripple through the economy, with potential losses estimated at $5 billion per day. However, while manufacturers scramble to mitigate immediate impacts, the real question they should be asking is: “What could we have done to be better prepared?”
Disruptions like these are becoming more like interruptions, with challenges to supply chain volatility starting to seem like day-to-day occurrences. Yet many companies find themselves in a reactive position — scrambling for alternatives when the unexpected strikes. In contrast, those with a proactive supply chain strategy, while not completely immune to these shocks, can absorb them with fewer consequences.
Most manufacturers believe they are prepared for supply chain disruptions because they have contingency plans in place. In reality, however, those plans are often fragmented and short-term in focus, failing to address the complexity of modern supply chains. Companies need to think beyond traditional risk management approaches and invest in building resilient supply chains that are agile and adaptive to any type of disruption.
These types of supply chains are built over time, and not with simple “quick fix” actions. Following are six critical steps that should be at the top of your to-do list to build agility, efficiency and resiliency into your supply chains.
Building Financial Resilience Through IBP and S&OP
Where you probably are today: Most manufacturers have financial contingency plans, but few have integrated them into their overall supply chain strategy. Financial planning and supply chain planning are often siloed functions, which means that when disruptions occur, companies struggle to realign their financial strategies with their operational realities. In addition, many manufacturers do not have both strategic and tactical planning processes and if they do, they are not synchronized.
Where you should be: Adopt integrated business planning (IBP) for your strategic, longer-term planning that looks beyond a two-year horizon and integrates both financial and operational planning. Include in this process your entire business ecosystem, not just your organization. This approach enables companies to model different disruption scenarios, understand their financial impact, and align supply chain strategies accordingly. Companies that integrate finance, supply chain and logistics planning can make more informed decisions about cost trade-offs, and prioritize investments in alternative logistics routes or additional inventory.
At the tactical level, adopt holistic sales and operations planning (S&OP) that is the shorter-term piece of IBP. This process goes out to the one- to two-year horizon and is connected to the strategic plan, but allows companies to make quicker, more agile decisions as issues occur that might disrupt the plan.
Diversifying Supply and Distribution Channels
Where you probably are today: Many manufacturers assume that having a single primary port or logistics hub strategy is cost-effective and efficient. However, this concentration can turn into a critical vulnerability when labor strikes, bridge collapses, pandemics or other issues occur. The U.S. port strike is a stark reminder that relying on a single point of entry or exit can lead to severe operational paralysis when a major crisis happens.
Where you should be: Manufacturers should explore multiple supply and distribution channels, even if that means using more complex logistics networks. This includes identifying alternative ports, investing in inland transportation options like rail and trucking, and even considering warehousing capacity in different geographic regions. Implementing supply chain optimization software along with new tools like process mining technology can help identify the most effective routes and alternatives, ensuring minimal disruption when primary channels are blocked. These can be continually evaluated through both the IBP and S&OP process reviews.
Implementing Real-Time Visibility and Predictive Analytics
Where you probably are today: Most companies already have systems for monitoring inventory, but few are equipped to provide real-time visibility across their supply chain network, including upstream suppliers and logistics partners. Without this level of visibility, manufacturers are often caught off guard when disruptions cascade through their supply chain.
Where you should be: Invest in cloud enterprise resource planning (ERP) and supply chain visibility tools that offer real-time tracking and predictive analytics. This technology not only helps identify potential risks before they become critical issues, but also provides insight into how a strike or other disruptions will affect supply chain nodes downstream. When these tools are combined with predictive models driven by artificial intelligence, companies can forecast potential impacts and initiate contingency plans with precision.
Strengthening Supplier Collaboration and Strategic Sourcing
Where you probably are today: Simply having alternative suppliers is not a sufficient strategy. The key lies in the strength of your relationships with those suppliers and your ability to collaborate in real time. Companies that do not actively engage their suppliers and logistic partners may find that during disruptions, those secondary suppliers are either overcommitted or unable to deliver on short notice.
Where you should be: Create a framework for strategic supplier collaboration, which may include shared planning, demand forecasting and inventory management systems. This level of integration ensures that alternative suppliers aren’t just backup options but active participants in your supply chain strategy. An effective collaboration tool can bridge the gap between your ERP, supply chain and quality management systems, providing a seamless exchange of information and coordinated response strategies. Collaboration and S&OP within the organization is just the starting point. The entire business ecosystem, including upstream and downstream trading partners, has to be part of every phase of business planning.
Implementing Trade and Export Management Systems
Where you probably are today: Many manufacturers do not realize how critical trade and export management software can be until they’re hit by regulatory issues or delays at customs due to disruptions at major ports. Even when alternative ports or logistics routes are available, regulatory compliance can become a bottleneck.
Where you should be: An advanced trade and export management system can automate and streamline customs documentation and compliance processes. By integrating this system with your ERP and supply chain applications, you can quickly re-route shipments through alternative ports while ensuring that all regulatory requirements are met, thereby minimizing delays. By making sure you have all your import, export and trade compliance documents and details current, with alternative approaches such as taking advantage of free trade zones, you can minimize the impact of significant crises.
Embracing Digital Twin Technology for Scenario Planning
Where you probably are today: Most manufacturers conduct periodic risk assessments, but lack the capability for continuous scenario planning. Digital twin technology, which creates a virtual model of your supply chain, can simulate various disruption scenarios, allowing companies to see how changes in one part of the supply chain will ripple through the entire network.
Where you should be: Invest in digital twin technology to create a dynamic, digital representation of your entire supply chain. Use this model to run different disruption scenarios, including labor strikes, natural disasters and demand shocks. This capability allows for better preparedness and faster, more informed responses when disruptions actually occur.
Key stakeholders who need to be involved in the effort include:
- Supply chain executives and leaders. Expand your supply chain playbook beyond traditional risk management. Implement real-time visibility and predictive analytics to turn disruptions into opportunities for competitive advantage.
- Finance executives. Integrate financial and operational planning to understand the full financial impact of supply chain disruptions and to ensure a resilient bottom line, even in times of uncertainty.
- Operations and manufacturing executives and leaders. Optimize your operational flexibility by deploying digital twin technology and alternative distribution strategies.
- IT and technology leaders. Enhance your digital ecosystem with integrated ERP, supply chain visibility, and trade management systems that offer a unified view and automated response to disruptions.
Manufacturers that view disruptions such as the U.S. port strike as an opportunity to challenge their assumptions about supply chain management, and make significant structural changes to their business processes, will emerge as stronger organizations. The future belongs to companies that strive to embrace proactive adaptability to become agile, efficient and resilient. Investing in integrated technology applications that build deeper relationships with the entire ecosystem and enhance scenario planning will help you optimize your people, processes and systems. This latest port strike is just one crisis — are you prepared for what’s next?
Stephen Dombroski is director of consumer markets with QAD.