A resilient supply chain is defined by its capacity for resistance and recovery. That means having the capability to resist or even avoid the impact of a supply chain disruption – and the ability to quickly recover from a disruption. Operational risk and interruption can threaten multiple areas of the supply chain. Worldwide disasters, as we’ve seen with COVID-19, can have a far-reaching, global impact upon supply chain logistics, suppliers, and workforces. Other supply chain disruptions can come in the form of unexpected competition, sudden market trends, or even rapid changes in customer shopping behaviors.

The most resilient and agile supply chains are designed to do more than simply resist and recover. They are built using processes and modern supply chain technologies that allow them to forecast, anticipate, and respond quickly to whatever risks or opportunities the future brings.

What is supply chain resilience? Learn all about it in this short video.

Supply chain in a changing world

As long as there have been supply chains, risk management has been a challenge. Due to the interdependency of all its links, even a small problem in one isolated region has the capacity to compromise an entire global supply chain. So, when major worldwide trends and events take place, the potential for widespread supply chain disruption is enormous.

Global supply chain risks and market disruptions are at an unprecedented high. Of course, the foremost of these has been the COVID-19 pandemic. In an April 2020 survey, the Institute for Supply Management found that 95% of businesses had experienced operational problems due to the pandemic. Business leaders around the world agree that modernization and major changes to their supply chain strategies will be necessary if they hope to be more resilient and competitive in the current market. 

Other recent factors that are having extremely disruptive effects on traditional supply chain practices include the rapid rate of change in consumer behaviors – and a highly unpredictable trade and political climate.

Pandemics aren’t the only threat to global supply chains. To be resilient, companies need to include local suppliers.

In the past 10 years, e-commerce spending has tripled, and in the first seven months of 2020, there was a 149% rise in online shopping from the previous year. With the growth of e-commerce, there has also been a rise in consumer demand for delivery speed and personalized shopping experiences. The Amazon Effect refers to the increasing expectation for next-day delivery and how that has impacted businesses and logistics networks. In order to be resilient enough to adapt to these growing demands, supply chain managers have had to make rapid and significant changes to their logistics and warehousing networks and find ways to work with increasing numbers of third-party fulfilment partners.

Even before the repercussions of COVID-19, U.S. businesses were striving to reduce their dependency upon overseas manufacturers and suppliers. By 2019, foreign tariffs and overseas trade policies had become increasingly unpredictable and businesses were looking for technological solutions to make their supply chains more self-reliant and resilient. Integrating digital transformation and Industry 4.0 technologies into supply chain operations is becoming a growing priority for global business leaders.  

How does supply chain resilience work?

Good supply chain management means being able to respond quickly to operational disruptions and having a flexible contingency plan in place. But to be truly resilient, a supply chain must be able to forecast and anticipate disruptions, and, in many cases, avoid them altogether. In 2019, PWC commented on the importance of supply chain resilience, saying, “It’s not just about playing defense – it’s also about playing offense – finding competitive advantage by shaping a supply chain resilience strategy focused on disruption avoidance.” 

How a resilient supply chain works

Top three benefits of a resilient supply chain

In an increasingly competitive market, finding a profitable balance between supply and demand is a major challenge for every supply chain manager. Many companies that cut corners on diversification, supply chain technologies, and other resilience measures have recently been finding out the true cost of those decisions. But when companies invest in diversification, supply chain technologies, and other resilience measures, there are many potential business benefits, including:  

  1. More efficient operations: Greater resilience often leads to minimized risk and greater ability to invest in innovation and growth. In a 2020 global business analysis, Bain and Company reported that companies that had prioritized investment in supply chain resilience had up to 60% shorter product development cycles and were able to expand their output capacity by up to 25%.
  2. Improved productivity: Resilient supply chain technologies contribute to an overall rise in productivity across the system. In a 2020 survey by McKinsey, supply chain leaders from around the world report improved productivity as a result of resilient supply chain systems, and 93% of those surveyed plan to make resilient supply chain strategies a top priority for investment in the coming year.
  3. Risk reduction: Supply chain operations often represent the greatest area for risk and loss in many companies. By their natures, supply chains are globally dispersed and complex in their functionality. This makes them especially vulnerable to risk. Resilient supply chain technologies reduce risk by allowing visibility into all operations across the network – and empowering businesses to optimize and adapt their processes and logistics in real time.

Agile supply chain technologies 

Digital transformation and modern supply chain technologies give businesses the resilience and competitive edge they need to respond quickly – to both disruptions and opportunities.

Resilient supply chains in action

Resilience means more than simply surviving operational disruption. A truly resilient supply chain – and company – not only weathers difficult times, but uses those challenges to innovate and strengthen their business. See how these companies used ingenuity, creativity, and modern supply chain technologies to respond to disruption.

SAP customers are demonstrating resilience, identifying urgent needs, and delivering meaningful solutions during COVID-19.

Explore SAP supply chain management solutions

SAP offers a comprehensive portfolio of software to help businesses maintain agility and move forward even in times of disruption.