Wanted: a supply chain strategy for an era of disruption

In simpler times, supply chains were designed to optimize for two variables: cost and service performance. And for a long time that elementary calculation seemed sufficient. It made just-in-time manufacturing practices possible and helped deliver the continuous efficiency gains that satisfied the appetite of Wall Street. 

But the untroubled façade of global supply chain operations concealed cracks, gaps, and structural voids. When multiple converging disruptions battered the global economy in 2020, those vulnerabilities were exposed, and the whole edifice was shaken to its foundations. It turns out supply chain design isn’t so easy after all.

Today’s procurement and supply chain executives have learned through painful experience that there’s more to supply chain strategy than efficiency. Just-in-time efficiency needs to be balanced with resiliency; Environmental, Social, & Governance (ESG); and e-commerce requirements. Supply chains which are subject to near-constant disruption need the capacity and flexibility to respond to a dizzying array of risks and shocks—geopolitical tensions, erratic labor availability, extreme weather events, bizarre accidents, uncontrolled disease outbreaks, shortages of equipment and raw materials, and more.

In short, if solving for supply chain questions used to be a matter of simple arithmetic, today it more closely resembles differential calculus. 

Question time

Today’s business environment calls for a holistic approach to ensure that supply chain strategy aligns with organizational strategy and satisfies customer expectations. Successful designs address five key factors that can either enhance or degrade the supply chain’s vulnerability to disruption, including:

From assessment to action

Realistic responses to those questions yield an assessment of the current state of the organization’s supply chain and highlight strengths and vulnerabilities across the entire network. Supply chain strategists can then identify opportunities for improvement in four key elements of the business: assets, people, process, and technology. Examples of such improvements include:

• Assets: Optimization of assets such as plants, warehouses, and inventory can be a powerful lever to improve supply chain performance. Facility design and location have become more critical than ever; informed decisions about whether to outsource certain functions or keep them in-house can help the organization focus on its core strengths and enable its strategic vision.
• People: By revisiting organization design—and more specifically required skills and capabilities—a company can better align its talent with its digital roadmap. Updated dashboards, metrics, and management tools can accelerate the detection of issues and anomalies, shifting execution and planning management to a proactive rather than reactive approach.
• Process: The development of processes that align with both upstream and downstream elements of the overall value chain can improve end-to-end coordination and minimize pain points and awkward handoffs, lost time, and lost value. Equally critical are business process designs that leverage the operation’s existing technology stacks.
• Technology: By applying digital capabilities across the organization, a business can not only enhance organizational efficiency and effectiveness (through the use of innovations such as robotic process automation), but it can also provide managers with an unimpeded view of the entire operation and help them identify issues before they become acute.

The events of 2020 and beyond mercilessly exposed the shortcomings of conventional supply chain strategy and elevated supply chain improvement to the top of senior management’s priorities. But the complexities and urgency of the undertaking can give pause to even the most capable executive. The skills, tools, and experience that a trusted advisor can bring to the table may spell the difference between a supply chain strategy that delivers competitive advantage and one that stands in the way of healthy organizational evolution.