What is Supplier Resilience? – Definition
As companies have become increasingly reliant on global supply chains to remain competitive, the ability to ensure that those chains are resilient has become a critical business capability. This is where supplier resilience comes into play—it’s the practice of evaluating, managing and adapting suppliers and their networks to ensure they can withstand disruptions and maintain continuity. In this blog post, we will explain what supplier resilience is, why it matters, and provide helpful tips for building a more resilient supply chain. Read on to understand the key concepts behind supplier resilience for your organization!
What is supplier resilience?
Supplier resilience is the ability of a supplier to withstand and recover from disruptions. A resilient supplier is one that can maintain or quickly restore its supply of goods or services despite changes in demand, weather, transportation, or other conditions.
A supplier’s resilience is important because disruptions can cause significant problems for businesses. For example, if a supplier cannot deliver goods on time, businesses may have to cancel orders or incur additional costs to find replacement suppliers. Therefore, it is important for businesses to work with suppliers that are resilient and have contingency plans in place to deal with disruptions.
There are a number of ways to measure supplier resilience. One common metric is the supplier’s on-time delivery rate (OTD). This metric measures the percentage of orders that the supplier delivers on time. A high OTD indicates that the supplier is good at meeting delivery deadlines and is therefore more likely to be able to meet customer demands even in the face of disruptions. Other metrics that can be used to measure supplier resilience include lead time variability and fill rates.
Lead time variability measures how consistent the supplier’s lead times are. A low lead time variability indicates that the supplier is good at meeting promised delivery dates. Fill rates measure the percentage of orders that the supplier fills completely and on time. A high fill rate indicates that the supplier is good at fulfilling customer orders and is therefore less likely to be impacted by disruptions.
There are a number of ways businesses can increase their own resilience by working with
The different types of supplier resilience
In order to be successful, businesses must have a supplier resilience plan in place to protect against risks. Here are the different types of supplier resilience:
1) Diversification: This type of supplier resilience is achieved by having multiple suppliers for each product or service. This minimizes the impact of any one supplier going out of business or experiencing a disruption.
2) Redundancy: This type of supplier resilience is achieved by having backup suppliers in place. This ensures that there is always a source for the product or service, even if the primary supplier experiences a disruption.
3) Flexibility: This type of supplier resilience is achieved by working with suppliers who are able to quickly adapt to changes. This allows businesses to continue operations even when there are unforeseen changes in the marketplace.
How to measure supplier resilience
When it comes to supply chain resilience, there are a few key performance indicators (KPIs) that you can use to measure supplier resilience. Here are a few of the most important ones to keep an eye on:
1. Lead time variability: This KPI measures the variability in lead times for your supplier. If lead times are consistently long or fluctuate wildly, it can be a sign that your supplier is not very resilient.
2. On-time delivery: This KPI measures the percentage of orders that are delivered on time by your supplier. Obviously, you want this number to be as close to 100% as possible.
3. Stockouts: This KPI measures the number of stockouts experienced by your customers due to suppliers being unable to meet demand. A high number of stockouts can indicate that your suppliers are not very resilient.
4.perfect order fulfillment rate: This KPI measures the percentage of orders that are fulfilled without any errors or issues. A low perfect order fulfillment rate can indicate that your suppliers are not very resilient.
The benefits of supplier resilience
When it comes to supplier resilience, there are many benefits that make this term worth paying attention to. Here are some of the reasons why supplier resilience is so important:
1. Increases business continuity – In the event that one of your suppliers experiences a disruption, having a resilient supply chain will help ensure that your business can continue to operate without any major issues.
2. minimizes financial risk – By having a more resilient supply chain, you can protect your business from potential financial losses that could occur if one of your suppliers was unable to meet their obligations.
3. Enhances reputation – A company with a robust and resilient supply chain is often seen as being more reliable and trustworthy, which can help improve its reputation in the marketplace.
4. Helps attract and retain customers – Customers are often more likely to do business with companies that they perceive as being able to weather any storms that come their way. As such, having a strong reputation for supplier resilience can help you attract and retain customers.
The challenges of supplier resilience
When it comes to supplier resilience, there are a few key challenges that organizations face. The first challenge is ensuring that suppliers are able to meet demands in the event of a disruption. This can be difficult to achieve as disruptions can come in many forms – from natural disasters to political instability – and each type of disruption presents its own unique challenges.
Another challenge is maintaining communication with suppliers during a disruption. This is important in order to ensure that orders are still being fulfilled and that any potential issues are quickly identified and resolved.
Finally, organizations need to consider how they will finance their supplier resilience efforts. This includes both the upfront costs of implementing resilience measures and the ongoing costs of maintaining them. For many organizations, these costs can be significant and may require careful planning and budgeting.
Conclusion
Supplier resilience is an important concept to understand, as it is essential to ensure a company’s long-term success. By understanding the impact of supplier disruption on business operations and learning how to plan for potential disruptions, businesses can be better prepared in the case of any unexpected events. Companies should take advantage of all available resources such as utilizing risk assessments and investing in robust supply chain solutions that support supplier resilience. Supplier resilience requires effective planning, proactive measures, and continuous assessment which will help protect businesses from costly supply chain disruptions.