What Is Supply Chain Volatility?

The term “supply chain volatility” is used to describe the variability and uncertainty inherent in moving goods from suppliers to customers. This can include factors such as raw material shortages, transportation disruptions, and changes in consumer demand.

While some variability is always present in supply chains, recent years have seen an increase in the overall level of volatility. This is because of several factors, including global trade growth, the rise of digital technologies, and the increasing complexity of supply chains.

Supply chain volatility can majorly impact businesses, causing production disruptions, delivery delays, and increased costs. Managing supply chain volatility is a critical challenge for businesses operating in today’s global economy.

How to Manage Supply Chain Volatility

Excessive volatility can lead to serious problems. If a company is not prepared for sudden changes in demand, it may not meet customer needs. This can lead to lost sales and a decline in profitability. However, there are several ways to measure and manage supply chain volatility.

Use Supply Chain Risk Management Tools and Techniques

One common approach is to use supply chain risk management tools and processes. These can help businesses to identify and mitigate the risks associated with volatile supply chains.

Another popular approach is to use supplier performance management techniques. This involves monitoring supplier performance and using this information to decide about how to manage the supplier relationship.

Outsource to a Third Party

Another option for managing supply chain volatility is to outsource the supply chain management to a third party. This can be an effective way to mitigate risk and ensure that the supply chain is managed effectively.

Improve Forecasting Accuracy

One of the most important things a company can do to manage volatility is to improve its forecasting accuracy. By understanding past patterns of demand and using the latest data and analytics, businesses can develop more accurate forecasts of future demand. This gives them a better chance of being able to meet customer needs, even during periods of high volatility.

Use Volatility to Your Advantage

Sometimes, it may be possible to use volatility to your advantage. For example, if a company can expect a change in demand before its competitors, it may increase its market share. Similarly, if a company can quickly adapt its supply chain to meet changing demand, it may gain a competitive advantage.

Manage Risk

Another way to deal with volatility is to manage risk. This involves identifying the risks associated with fluctuations in demand and taking steps to mitigate them. For example, a company might take out insurance to cover the cost of lost sales during a downturn. Alternatively, it might use hedging strategies to protect against swings in the price of raw materials.

Develop Contingency Plans

Another way to manage supply chain volatility is to develop contingency plans. This involves having plans to deal with disruptions in the supply chain. The contingency plans should minimize the impact of the disruption and ensure that the business can continue to operate effectively.

Build Flexibility into the Supply Chain

It is crucial to monitor the supply chain closely to identify potential problems and take action to mitigate the risks.

Another way to manage volatility is to build flexibility into the supply chain. This can be done in several ways, such as by stocking a wider range of products, using just-in-time production methods, or establishing relationships with multiple suppliers. Having a flexible supply chain gives companies the ability to quickly adapt to changes in demand and minimize the impact of volatility.

Build Resilience

Another key strategy for managing supply chain volatility is to build resilience into the supply chain by having contingency plans to deal with disruptions, such as natural disasters or supplier problems. This can be done by diversifying supplier networks, stockpiling key materials, and using alternative transportation routes.

Building resilience in the supply chain is a critical need for businesses in today’s volatile world. Businesses can protect themselves from disruptions and ensure they can continue to meet customer demand by taking steps to mitigate the risks associated with volatility.

Why Choose Cybergear?

Cybergear has over 15 years of experience in supply chain management. We have a proven track record of helping businesses effectively manage their supply chains, even in times of volatility. Our team of experts can help you develop a comprehensive strategy for managing supply chain risk. We can also provide support in implementing and managing contingency plans.

If you want to learn more about how we can help you effectively manage supply chain volatility, please contact us today. Call Cybergear at (586) 531-7116 for any questions regarding supply chain volatility.