Creating a Resilient and Agile Supply Chain

Stephen DeAngelis

March 30, 2021

The first lesson supply chain professionals learned at the outset of the pandemic was the importance of resilience. The second lesson was equally important — supply chains must be agile. A global study conducted by Gartner, proves the point. The study “discovered that 87% of respondents plan to invest in supply chain resilience in the next two years, while 98% are looking to invest in agility.”[1] Geraint John (@geraint_john), vice president analyst with the Gartner Supply Chain practice, observes, “Supply chain executives overwhelmingly recognize the necessity to make their networks more resilient and agile. At the same time, 60% admit that their supply chains have not been designed for resilience, but cost-efficiency. The challenge will be to create an operating model for supply chains that combines the best of both worlds and also delivers supreme customer service.” Easy, right? No wonder some supply chain professionals find it hard to sleep at night. Analysts at PYMNTS.com assert it is no longer just supply chain professionals concerned with risk management, they note, “This area of expertise has become a priority for more members of the C-suite. … Among the biggest impacts of the pandemic is that supply chain risk management is now a board-level discussion. Yet organizations continue to experiment and explore how exactly to evolve their risk management strategies.”[2] They add, “If the last year has taught corporates anything, it’s that the only thing certain is that nothing is certain.”

 

What does it mean to be resilient and agile?

 

Matthew Hinton and Ammi Small, from Control Risks, write, “One of the challenges of becoming a resilient organization is understanding exactly what that means. Even the scope of ‘resilience’ varies from one leadership team to another: to some, it means everything and to others it means nothing. At some organizations, it’s the wrapper that brings together all risk management functions, and for others, it’s a theoretical or academic term — even just a buzzword — that doesn’t translate well. Resilience is interpreted and implemented in many different ways and today’s global business environment likely won’t change that anytime soon.”[3] To bolster their point, they point to a survey conducted by their company which found, “‘Resilience’ still does not have one common definition, nor is there consensus on how, or even whether, it should be used. Thirty percent of respondents said that their organizations do not use the term ‘resilience’. Of those that do use the term, 65% of businesses describe resilience as ‘a proactive function detecting risk and disruption early’ and use this information to make critical decisions followed by actions; 26% of businesses apply it as a ‘reactive function for responding to disruptions and incidents.'”

 

Despite the apparent confusion, Gartner defines resilience as “the ability to adapt to structural changes by modifying supply chain strategies, products and technologies,” and defines agility as the ability to sense and respond to unanticipated changes “without sacrificing cost or quality.” David Shillingford, CEO of Everstream Analytics, told the PYMNTS staff that resilience and agility require end-to-end visibility that can provide a holistic view of the supply chain. “By that, we mean looking at risk from an end-to-end standpoint,” Shillingford explains. “[Companies must think] about it from sourcing, all the way through to product delivery and beyond, through the reverse supply chain.” The PYMNTS staff adds, “While supply chain risk management strategies can be complex and multifaceted, there are two key characteristics of a successful program. They include the ability for a company to predict risks ahead, and the capability to act with agility when unpredictable events occur.”

 

Becoming resilient and agile

 

In order to predict risks with any confidence, a multitude of data sources must be used and analyzed. Obviously, this can’t be done manually within the time frames leaders need to make critical business decisions into today’s fast-paced environment. During the pandemic, Enterra Solutions® developed the Enterra Global Insights and Optimization System™ as part of the Enterra System of Insight and Actions®, which created new ways to combine and analyze data in order provide insights to decisions makers in a rapidly-changing environment. Identifying the right external factors was critical to this effort. As the PYMNTS staff notes, “Thanks to technologies like predictive analytics, businesses now have a wider opportunity to mitigate risk in the planning phase of supply chain operations. Likewise, they should also have backup plans in order to be able to respond quickly as the market ebbs and flows. Having both and bolstering each strategy through sophisticated, real-time analytics is a formula for a more robust supply chain.”

 

Hinton and Small assert that, regardless of how you define resilience, resilient companies share some common characteristics — and they use the word “resilience” to identify those characteristics:

 

  • Risk aware. “Resilient organizations are aware of both their existing and emerging risks and proactively address them to reduce the likelihood that they will materialize into a crisis.”
  • Engaged top to bottom. “Everyone in the organization — from the board of directors down to the entry-level staff — must be aware and engaged in resilience activities so that they know their roles and responsibilities before, during and after crises strike.”
  • Secure. “Being resilient starts with avoiding crises where possible — and that’s impossible to do unless you’ve secured your core physical and technology assets.”
  • Intel-driven. “Acting on a whim and a prayer isn’t a reliable, workable plan during a crisis; decisions must be intelligence driven if the company is going to avoid or minimize the impact of crises.”
  • Locally-informed. “Having a global mindset is key, but nuance matters in a crisis and that mindset must be locally informed. What works in one location may not in another due to cultural and geographic differences.”
  • Improvement-minded. “The companies that succeed in avoiding, responding to and emerging stronger from crises often do so due to their deep commitment to continuous learning. These are the organizations that take governance and planning seriously and ensure exercising and training are a core part of their DNA.”
  • Elastic. “Companies must be flexible and adapt to both the changing risk environment as well as challenges they face throughout the lifecycle of a crisis. Flexibility often breeds innovation, which can make the difference between surviving and thriving during a disruptive event.”
  • Near- and far-sighted. “All too often, organizations in crisis are only focused on what is right in front of them, including myopic pursuits of root cause analysis and operational solutions. Truly resilient organizations understand the importance of delegation of authority and empowering management to focus on the day-to-day of the crisis, while leadership focuses on achievement of their strategy and the future.”
  • Culture-led. “Organizations must lead with their values and embrace their unique culture as they prepare for, respond to and recover from crises. Veering away from your core values during the most difficult of times not only leaves employees and customers confused and wondering what the organization really stands for but also whether they want to embrace that going forward.”
  • Empathetic. “Crisis communications is one of the most important aspects to an organization’s ability to avoid and respond to crises, and nothing in crisis communications is more important than empathy. Displaying genuine empathy in a crisis can make the difference in how employees and customers see the organization and have a real impact on the organization’s reputation after the crisis is over.”

 

A survey conducted by the Association for Supply Chain Management (ASCM) found, similar to the Gartner study, resilience has become a corporate priority. Peter Bolstorff, Executive Vice President of corporate development at ASCM, states, “When we looked at resiliency with our risk committee, we looked at leaders and laggards. Leaders had invested in digital supply chains 24 months ago. They actually sensed changes in demand patterns in November 2019 [before the onset of the pandemic]. As opposed to laggards, who didn’t wake up and smell the pandemic until February-March.”[4] He adds, “[Resilient companies] had higher average factory utilization from November to March than did laggards, because they were able to understand the impact of the demand and supply shocks. Leaders were also able to minimize their service [disruption] and cost impacts to their customers and shareholders.” At Enterra, we call this the ability to Sense, Think, Act, and Learn®. The cognitive computing capabilities that can make an organization more resilient can also help make it more agile. If you’re not a leader, it’s time to stop being a laggard.

 

Footnotes
[1] Georgia Wilson, “Gartner: 87% of supply chains to invest in resilience,” Supply Chain Digital, 11 February 2021.
[2] Staff, “Mixing Predictability With Agility To Combat Supply Chain Risk,” PYMNTS.com, 3 March 2021.
[3] Matthew Hinton and Ammi Small, “Making sense of resilience in a shifting global environment,” Security, 22 February 2021.
[4] John Gallagher, “Supply chain resilience to reach new heights in 2021 — survey,” FreightWaves, 15 December 2020.