Supply Chain Resilience is a New Imperative

Stephen DeAngelis

September 1, 2020

The topic of supply chain resilience sprouted in the media and professional journals as a result of the coronavirus pandemic. Resilience is defined as the capacity to recover quickly from difficulties or spring back into shape. The pandemic has certainly tested those supply chain characteristics. Suketu Gandhi and Steve Mehltretter, partners at Kearney, explain, “For many companies, supply chain excellence has long meant developing the most cost-effective way to deliver a product on time to your customers. While detailed modeling and analysis are often completed to design these ‘optimal’ supply chains, it was usually only done for a relatively narrow range of supply and demand variability options. When the COVID-19 pandemic hit, many businesses learned the hard way how this tight focus limited their abilities to cope with a sudden shock to their supply chains. The pandemic has proven that the definition of supply chain excellence must be expanded beyond cost effectiveness and on-time performance to also consider supply chain resilience.”[1] Science and tech journalist Megan Ray Nichols (@nicholsrmegan) adds, “Supply chain resiliency has quickly become a major topic across the world. … Building a resilient supply chain is possible, and it can have some big benefits for businesses that put effort into strengthening their supply chain practices.”[2]

 

Where to begin

 

You can’t make your supply chain more resilient if don’t know where points of pain and vulnerability exist. “For most businesses,” Nichols writes, “building a resilient supply chain will start with research. … This research will need to be in depth.” Karim Aroui, a Business Consultant at QAD Inc., adds, “Key to a responsive supply chain is the ability to identify and understand the potential threats that could menace supply chain operations. For example, node and supply chain process vulnerabilities can be linked to single sourcing, single point of income, outsourced operations, technology reliance, energy reliance, foreign currency exposure or specific human talent.”[3] Simone Ross, chief operating officer for Setlog Corp., suggests the best place to start looking is not with potential threats, but identifying areas in which areas breakdowns have already occurred. She writes, “Collaborate across all your teams and conduct a deep dive into your business. Remember, every department involved in your supply chain plays an essential part moving forward. Supply chain professionals should take a hard look at what actually broke down during the crisis.”[4]

 

Once you’ve identified known threats, dig deeper. Gandhi and Mehltretter suggest one way to uncover vulnerabilities is to stress test your supply chain. They explain, “Companies need to evaluate how resilient their supply chains are in order to determine their strengths and vulnerabilities in light of unanticipated shifts and future crises. These evaluations or ‘stress tests’ would resemble the banking stress tests that came into being due to the Great Recession and shifted banks’ focus away from short-term profit toward the long-term resiliency. … The supply chain version of these stress tests would feed into the development of a plan that sets the course for improving supply chain resilience, with an emphasis on the flexibility needed in the uncertain times ahead. These stress tests would examine supply chain resiliency along a number of different dimensions, including geography, planning, suppliers, distribution, manufacturing, product portfolio/platforms, and financial/working capital.” They go on to discuss each of those areas and reading their entire article is worth the time.

 

Bolstering resiliency

 

Once you have identified areas of vulnerability, you need to go about fixing them. Many analysts believe implementing digital technologies is essential to this effort. Vivian Wagner writes, “From digitizing the supply chain to developing more local and regional components, businesses are finding new and innovative ways to strengthen their capacity to keep moving forward during crisis. Building this kind of resiliency is all about expecting and planning for a variety of emergencies.”[5] Wagner’s emphasis on planning for a variety of emergencies highlights the fact that supply chain professionals need to be armed with all sorts of data from a wide array of indicators. Cognitive technologies, like the Enterra Global Insights and Optimization System™, can gather and analyze data from myriad sources, and can provide insights to decision-makers in a timely and understandable manner. “According to Bain and Company,” writes Ross, “it’s time to refocus on resilience. In just one example, they say that advanced analytics can improve supply forecast accuracy by 20% to 60%.” She adds, “If you haven’t done it already, on board and leverage technology to gain full visibility into every aspect of your operation. You’ll come out a winner, I guarantee it!”

 

Amit Prasad agrees that digitization and cognitive technologies are essential for making supply chains more resilient. He explains, “Connectivity and visibility are essential in today’s world of uncertainty and unpredictability. Supply chain digitalization can help businesses strategize and achieve resiliency against disruptions by readily accessing valuable data during and after disruptions. This will not only mitigate risk but can also help grow revenue, profit and market share. Data science enables you to convert big data generated by a typical supply chain into valuable insights that you can use for strategic and tactical decision making. Artificial intelligence (AI) and machine learning can analyze and model historical data, helping your business with better forecasting, planning, prediction and process automation.”[6] In addition to cognitive technologies, he notes, “Cloud computing, the Internet of Things (IoT), blockchain, collaborative robots and 5G technology are some of the advancements that the supply chain can harness to become a true data-powered strategic asset for the business.”

 

Concluding thoughts

 

Aroui concludes, “Organizations that can react better to disruption have a better chance of staying in business and can sometimes thrive by having a more responsive supply chain than the competition. A responsive supply chain allows businesses to react more quickly and more flexibly to external threats.” Gandhi and Mehltretter add, “Traditional approaches to supply chain management are no longer sufficient. Cost and performance remain important, but it is also critical to identify opportunities in the supply chain to reduce risk exposure through increased flexibility and redundancy.” Abe Eshkenazi, CEO of the Association for Supply Chain Management (ASCM), told Wagner, “A resilient supply chain has the capacity to overcome disruptions and continually transform itself to meet the changing needs and expectations of its customers, shareholders and other stakeholders. In order to develop resiliency, management needs to make a long-term commitment to building an agile, flexible organization structure and supply chain and integrating risk management into all of the organization’s decision-making processes.” Cognitive technologies can help this happen.

 

Footnotes
[1] Suketu Gandhi and Steve Mehltretter, “Toward a more resilient supply chain,” Supply Chain Quarterly, 23 July 2020.
[2] Megan Ray Nichols, “How to Create a Resilient Supply Chain,” Schooled by Science, 21 July 2020.
[3] Karim Aroui, “Risk Planning, the Black Swan and the Resilient Supply Chain,” CXOToday.com, 23 July 2020.
[4] Simone Ross, “Don’t Let a Good Crisis Go to Waste — Important Survival Lessons for Supply Chain Professionals,” Supply & Demand Chain Executive, 22 July 2020.
[5] Vivian Wagner, “Building Supply Chain Resilience During a Global Disruption,” ECommerce Times, 8 July 2020.
[6] Amit Prasad, “Building a More Resilient Supply Chain: Part II,” Longitudes, 10 July 2020.