Prior to the pandemic, efficiency was the primary focus of most supply chain operations. Severe disruptions during the pandemic changed that focus to resiliency. I’m not implying that efficiency no longer matters — it obviously does — but a disrupted supply chain can’t be efficient. Here’s the rub. According to analysts from the Boston Consulting Group (BCG), supply chain disruptions are likely to outpace resilience.”[1] As frustrating as that may sound, it doesn’t mean the quest for more resilient supply chains should be abandoned. Jeremy Kay, Managing Director and Partner at the Boston Consulting Group, insists many organizations “struggle to get a handle on how resilient they need to be.” He adds, “They don’t necessarily know the real value of resilience, and therefore how much they should be willing to invest in resilience. They also don’t know how far they need to go to mobilize the organization. Some companies assign one person, whereas others have set up teams of people dedicated to building operational resilience.” What does Kay advise? He suggests using a bit of common sense. He explains, “We advise clients to focus on investments that will give the best resilience returns, given their risk profile. It’s like investing in an insurance policy: you don’t want to pay for more insurance than you need but you don’t want to be underinsured either. Striking the right balance for resilience investments is hard but it’s better to make some assumptions and take action than to get stuck in analysis paralysis.”
Investing in Resiliency
Faisal Rashid, a Supply Chain Manager at Aramco, states what should be obvious: “Resilience is not an inherent trait of supply chains; it is a choice that companies must make.”[2] He adds, “Businesses must develop strategies that focus on risk management, agility, and flexibility. They must proactively assess potential risks and threats, and develop contingency plans to mitigate them.” Michael Corbo, former Chief Supply Chain Officer of Colgate-Palmolive, insists that resilience isn’t created by making one big choice but by making thousands of smart choices. He states, “To create supply chain stability, you need to have resiliency built into all your decisions. This will result in certain losses of efficiency — building in redundancies and planning for multiple variations of something may increase costs. But it also can prevent major disruption.”[3]
BCG analysts suggest a good place to start the journey towards a more resilient supply chain is by examining four areas: demand assessment; risk monitoring; risk mitigation; and, opportunity capture.[4] Data is obviously an essential element in each of these efforts — which is why experts continue to insist that supply chains must become more digital. Mindy Davis, SAP’s Vice President of Global Marketing for the Digital Supply Chain, explains, “Supply chains need to be risk-resilient and efficient. They need to take into account cost, speed, profit, customer service, and risk. This can be accomplished by connecting every process, contextualizing every decision, and collaborating with partners without obstacles.”[5] We all know, however, that data-sharing can be difficult.
Merilee Kern, Chief Strategy Officer and Chief Publicity Officer at Ascendant Group Executive Branding, suggests leveraging digital twin technology can help make supply chains more resilient. She writes, “Digital twins are digital replicas of physical supply chains. They integrate with the company’s systems to provide real-time insights on any sudden disruptions in a supply chain’s performance level, allowing supply chain management to become more proactive than reactive. Digital twins help companies mitigate environmental risks by immediately notifying them of natural disasters or other external forces that can harm the supply chain’s efficiency. This simulation provides an additional level of visibility that would otherwise be impossible without leveraging technology.”[6] During the pandemic Enterra Solutions® developed the Enterra Global Insights and Decision Superiority System™ (EGIDS™) to help clients make decisions during rapidly changing circumstances. Driven by Enterra’s artificial intelligence engine — the Enterra Autonomous Decision Science™ (ADS®) platform — EGIDS can help business leaders rapidly explore a multitude of options and scenarios.
Kern also suggests that utilizing tracking technologies can help with supply chain resilience. She explains, “Today’s supply chain management companies live in a fortunate time where they can collect real-time updates on current events courtesy of the Internet and other technologies. Companies can leverage social media to obtain consumer behavior analytics while also monitoring the industry, news and other sources that can indicate potential supply chain disruptions like the passing of a new regulation. Logistics and transportation technologies provide powerful modern digital fleet tracking so that companies can track their shipments and fleets across land and sea, all over the world. Analytics from cloud-based and other technologies provide valuable insights on — and can fiscally quantify — things like employee engagement and productivity. This data is direct feedback that supply chain managers can leverage to assess what leadership tactics are effective and which fail to drive workforce benchmarks.”
Other actions to increase resiliency recommended by BCG analysts include: Conducting a comprehensive risk assessment and monitoring of suppliers’ financial, strategic and technological risks; incentivizing supplier performance; evaluating partnership opportunities to reduce risk; and driving supplier sustainability.[7] It should be clear that resiliency is built on a foundation of data. As Davis notes, “Risk-resilient supply chains integrate design, planning, manufacturing, logistics, maintenance, and service. This helps to minimize data disconnects and process silos. … Risk-resilient supply chains bring accurate, in-the-moment operational data together with always-up-to-date business information. This allows supply chain managers to make better decisions in the moment.”
Concluding Thoughts
Kern concludes, “Mitigating avoidable business risk by proactively transforming and shoring up supply chains with digital technologies and methodologies like these is a trend forecasted to persist over the next few years. This as Gartner predicts that ‘by 2026, more than 75% of commercial supply chain management application vendors will deliver embedded advanced analytics (AA), artificial intelligence (AI) and data science.’ A McKinsey survey also cited that more than 90% of respondents reported they have invested in digital supply chain technologies in the last year. Digital transformation is already reinventing the modern supply chain across sectors as technologies like AI, machine learning (ML), lnternet of Things (IOT) and blockchain integrations grow. These next-generation digital deployments are offering innovative ways for supply chain professionals to procure highly accurate, up-to-the-minute data — the kind that creates opportunities for companies to predict and aptly react to macro and micro conditions, mitigate risks, and at the most extreme level, thwart a business busting disaster.”
Davis adds, “If minimizing risk is the new supply chain zeitgeist, then it’s only more important to connect every process, contextualize every decision, and improve collaboration with partners. No supply chain runs in isolation. Greater connectedness that spans the entire enterprise and extends to partners helps you identify risks early and react quickly in an informed way based on the latest information. This is what helps you build a risk-resilient supply chain.”
Footnotes
[1] Sean Ashcroft, “Supply chain disruption ‘likely to outpace resilience’ – BCG,” Supply Chain Digital, 21 March 2023.
[2] Faisal Rashid, “Resilience is a choice — it’s not a trait of supply chains,” Supply Chain Digital, 20 May 2023.
[3] Staff, “Build resilience into all supply chain decisions,” Kinaxis Blog, 23 May 2023.
[4] Rashid, op. cit.
[5] Mindy Davis, “What Does It Take To Build A Risk-Resilient Supply Chain?” Forbes, 30 January 2023.
[6] Merilee Kern, “3 Key Digitization Strategies that Drive Supply Chain Resiliency,” Supply & Demand Chain Executive, 30 March 2023.
[7] Rashid, op. cit.
