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UPS Insights

Reducing Business Risks for SMEs: Achieving a Resilient Supply Chain

By Paul Chee, Business Development Manager, UPS Singapore

In this tough economic climate many companies are recognising that they are not doing enough to make their supply chain resilient.

Forty-seven percent of survey respondents believe that they need to pay more attention to resilience, as revealed in a UPS report¹ , written in co-operation with the Economist Intelligence Unit.

Companies with fewer inventories and leaner supply chains are more vulnerable, as stated in the survey. It may be disconcerting from a company's point of view, since it is hard to compete when businesses are not lean. However, companies open itself up to expensive risks in the long run.

According to the report, companies are addressing the issue, though the techniques they currently use are proving to be challenging.

Here are strategies that may be considered best practices in supply chain resiliency:

1. Build lasting relationships

Sixty-six percent of respondents in Asia Pacific place a high importance on building lasting, solid relationships as the best way to maintain the quality of their supply chains and 34 percent moderately important, as cited in the survey.

This makes business sense, because trustworthy relations are not just desirable but critical. About six in ten companies expect their pool of high quality suppliers to grow in the next five years; only 12 percent see a decrease.

Transparency with all involved, which fosters competition, is required to make this work well. Relationships do have costs, but businesses think that the benefits make up for the costs.

2. Multi-sourcing and near-sourcing

Your supplier's site location is a factor in enhancing resilience. Multi-sourcing and near-sourcing, though distinct from each other, can both help answer the question: How do you maximize the benefits of having a good relationship with several suppliers?

If multi-sourcing is good for your business, then having suppliers from different parts of the world to reduce geopolitical or environmental risks makes sense. When you are increasing your presence in a certain country for both sourcing and sales considerations, also look at two other countries as a backup to balance risk.

On the other hand, near-sourcing can be a way to overcome the problem of longer lead time with global sourcing. For example, if your company is getting your supplies from the Middle East, it is useful to have a secondary supplier in Southeast Asia to be able to respond quickly to demand.

You need to build your supply chain in a manner that your business has alternative possibilities if one option becomes unsuccessful and that there are reliable people to call on when there is a tight deadline to meet.

1. 26 percent of the senior executives interviewed are based in Asia Pacific. The survey was supplemented with interviews of academic experts and leading supply chain practitioners.

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