Balancing just-in-time with just-in-case: Profitable redundancy in supply chains

The unacceptable levels of risk in long and fragile supply chains are not new, nor are they products of the COVID-19 pandemic. However, the experience of the past year has confirmed the time is now to introduce more resilience into supply chains.

That task, after years and even decades of increasing efficiencies, can appear daunting, prohibitively costly and damaging to the bottom line. However, if done strategically, enhancing this resilience can enhance both customer experience and profitability.

Digital visibility

The first part of this process is developing more digitally integrated supply chains, with a focus on improving network visibility and responsiveness.

For this to be a reality, regional networks will need to be well integrated, with partners throughout the supply chain sharing data in real time, providing the ability to monitor and react to any emerging disruptions.

Enhanced visibility improves the communication with customers in good times as well as during crises, enhancing customer experience and loyalty. The pandemic has proved that companies which can communicate well with their customers during a crisis retain them, even if delivery is delayed. By improving communication with customers during uncertain times, business can enable better customer experiences.

Multinational companies in Asia Pacific must take the lead on developing these digitally integrated networks, and focus on establishing a technology-driven “control tower” (or supply-chain hub) to centrally manage their regional production plants and supply networks.

This will require a robust implementation plan, focusing on:

Understanding current digital readiness levels throughout the supply chain and identifying priority pain points
Deploying pilot programs to understand which technologies can help address these pain points and reduce exposure to emerging risks
Develop a detailed roll-out plan incorporating learnings from pilot programs.

Targeted profitable redundancy

While a digitally integrated supply chain can deliver benefits to all customers, for maximum resilience companies should also identify their higher-value customers and adopt a ‘just-in-case’ approach for them.

This means mitigating supply chain risks by building redundancy or back-up capacity for premium customers – those for which the cost of a potential disruption far exceeds the cost of building back-up capacity.

That capacity can come in two forms – alternative supply options and buffer stocks of inventory.

The enhanced inventory levels enable companies to serve their high-value customers in a short time during normal times and still guarantee delivery during disruptions. Such a premium service enhances customer experience and enables profitable redundancy.