A framework for building supply chain resiliency
This is part one of a series with Pilot44 Supply Chain Innovation Practice Partner & Thought Leader, Jeff Way, to help business leaders understand the four pillars of supply chain resiliency, the key enablers of each, and how this can prepare your business for the future.
Supply chain is essential. Anyone living through the macro forces that have changed our world since Covid-19 hit can attest to that. So it may seem obvious to state that, in order to stay competitive, a business must proactively evolve supply chain and leverage new technologies that increase speed, reduce costs, and create new value.
However sometimes, no matter how advanced a supply chain is, a macro force comes along with the power to shake up and test an entire system, putting even the most proactive innovators in a reactive spin. COVID-19 is that example. Although it swept in almost overnight, its impact on all dimensions of supply will last forever.
So that begs the question: if supply chain innovations are so important yet can be completely disrupted by an unknown and unpredictable force – what’s the point?
This brings me to my main point: resiliency. The key to supply chain innovation is not a specific technology, but understanding a framework to respond and recover from disruptive events. And then learning how to operationalize that throughout your business.
In this post, you’ll get:
- A framework and overarching governance to operationalizing resiliency
- An overview of the four pillars of resiliency and their enablers
- An exploration of in-market examples and enabling technology
A framework for resiliency
In order to operationalize resiliency, organizations must pay attention to four pillars, each with its own features and capabilities that drive resiliency through sensing, predicting, and responding to disruptions in the supply chain and coordinating risk mitigation.
Each of these pillars also has key enablers related to organizational talent, integration of process, and technology to help power resilience through data, which we’ll dive into in upcoming posts.
But first, let’s define what those four pillars are and the key features of each:
- Supply chain visibility Supply chain visibility refers to an organization’s ability to sense and detect events – both internal and external – that have the potential to impact supply chain. This can be extreme weather, political events, or a pandemic. The ability to detect these events right away allows organizations to respond proactively instead of scrambling to adjust.
- Supply chain flexibility Supply chain flexibility refers to the capabilities that enable an organization to adapt to these internal and external risk factors in an agile and efficient way without significant operational disruptions.
- Supply chain partner collaboration This pillar focuses on building trust-based relationships with partners at every stage of the supply chain network – partners, manufactures, logistics, and retailers. A successful collaboration between all these partners will allow organizations to orchestrate mitigation actions during disruption events.
- Supply chain control A plan is only as strong as your ability to implement it. So the final pillar focuses on the ability of your supply chain management to implement business continuity plans, policies, and effectively execute processes to prevent disruptions.
Preparing for the new normal
Resiliency is a central supply chain domain that’s now on every executive and operator’s mind. To say that COVID-19 has spurred increased focus and innovation in this area would be a huge understatement. In the last year:
- 94% of Fortune 1000 companies have seen supply chain disruptions
- 75% of companies have had negative or strongly negative impacts on their business
- 55% of companies plan to downgrade their outlooks
- 71% of companies did not have a business operations continuity plan
During crises, global value chains become severely impacted along all dimensions. Built for efficiency, today’s supply chains cannot be easily switched to a state of effectiveness and responsiveness, especially in a time of stress where customer and product segmentations are changing so rapidly.
From massive spikes in consumer demand for hand sanitizer to manufacturers struggling with new workplace safety requirements, every step of the supply chain was forced to adjust operations mid-pandemic.
So the question that remains is: how do businesses transition to the new normal and prepare for the next crisis?
We’d like to start by redefining the new normal. In the past, companies have been very reactive when disasters hit. The new normal is by being proactive by way of implementing resiliency and predictive analytics throughout the supply chain.
How to operationalize resiliency
Operationalizing resiliency means implementing a continuous cycle of risk sensing, detection, analysis, response, and restoration to help adapt supply chains during and after a crisis.
- Sense – Establish capabilities to enable real-time monitoring of internal and external activity and events that can impact the supply chain network
- Detect – Enable detection and notification of impacting activity to the proper supply chain analysis capabilities and impacting channels
- Analyze – Build what-if scenario modeling and impact simulation capabilities that can determine total impact across the supply chain network and prescribe actions to minimize impact
- Respond – Execute protocols for risk mitigation with minimal impact to operations. Develop balanced scorecard to track and measure the effort
- Restore – Generate updated business continuity plans based on results and tailor the supply chain network and product flows to execute in preparation for future scenarios
The benefits of implementing this cycle are enormous. And there’s now an entire ecosystem of technology and startups to help businesses do just this – which I’ll cover in a future post.
In our next post we’ll deep dive into the first pillar of resiliency, define its key enablers, and walk through some of the technology organizations can use to operationalize resiliency. We’ll also look at some examples of companies investing in technology that can sense risk events, predict impact and prepare for the next macro event.