The Resilient Supply Chain! Passing Fad or Long Term Strategy?

Resilient Supply Chain

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Since the Coronavirus pandemic exposed the fragility of the global Supply Chain, everywhere you look you see the word “resilience” being used as the latest buzz word.

Everyone is talking about making Supply Chains more resilient and robust, as if there was never any attention in the past in this regard. The danger is that with the dissemination of vaccines globally, and things getting back to normal in the near future, albeit a new normal, people will quickly forget what we all just went through.

People will fall back into their old, comfortable ways and far too many will forget all about the need to embed resilience in their Supply Chains. For that reason we wonder whether the resilient Supply Chain is a passing fad or a sustainable strategy?

What is a Resilient Supply Chain?

The word resilience is thrown around so loosely these days we do wonder whether people really understand what it means to be resilient. Just saying you want to have a resilient Supply Chain doesn’t accomplish anything. You need the vision, the leadership, the strategy, and the resources to implement this capability.

According to mixmov.io, “Supply chain resilience is a supply chain’s ability to be prepared for unexpected risk events. If you have a resilient supply chain, you can manage to respond and recover quickly to these disruptions by returning to the original situation or by moving to a new, more desirable state in order to increase customer service, market share and financial performance. “

SAP insights states that “a resilient supply chain is defined by its capacity for resistance and recovery. That means having the capability to resist or even avoid the impact of a supply chain disruption – and the ability to quickly recover from a disruption.”

These definitions certainly make sense and they are relatable. Stuff happens, and it happens all the time. Man made disasters, natural disasters, and disruptions big and small, occur constantly somewhere in the world. So it makes sense that your Supply Chain should be designed to anticipate that disruptive forces will be at play at some point, and be able to recover and mitigate any impacts as expeditiously as possible.

Given that these objectives are likely shared by most businesses, and the people who run them, it is curious that Supply Chains have not been designed to be resilient. The proof that Supply Chains have not been resilient is that if they were we would not have experienced the massive, extended, unprecedented global disruption caused by the pandemic.

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I know I’m not the only one who went into stores in 2020 only to find that shelves were empty of everything from toilet paper to groceries and household goods. Where was the resilience?

This is why we worry about people giving lip service to resilience. Logically resilience makes sense. But human nature is such that as pandemic restrictions are relaxed we will just fall back into our old ways and talk of resilience will be a passing fad.

Why do we face this uncertainty and lack of sustainable resolve to establish resilient Supply Chains?

So What’s the Problem?

In the “Supply Chain Resilience Report 2020 released” article by logisticsit.com, “over 96% of global companies are now planning to take measures to boost the resilience of their manufacturing supply chains. However, more than half (52%) admit they are yet to embark on that journey.”

Given that 52% had not even started during the pressure cooker of the pandemic, our guess is that when things become more relaxed after the pandemic an even higher percentage of companies are at risk of abandoning a resilience strategy.

Risk management is challenging in the best of circumstances let alone when you are in the middle of a disaster compromising the very survival of your organization. It is a Cirque Du Soleil calibre balancing act.

An enormous part of the challenge in envisioning, and implementing, a resilient Supply Chain is because it requires a significant paradigm shift which runs counter to many bedrock Supply Chain principles that we have been following for decades.

Single sourcing, just in time inventory management, lean processes, outsourcing, lack of electronic connectivity, and low cost geographic sourcing have been core elements of most Supply Chains as planned and in practice. But all of these strategic elements run counter to what you would do if you were designing a Supply Chain with the sole intent of creating robustness and resilience.

Think about how many times you’ve been asked to review a Disaster Recovery plan. For so many people it is an unwanted distraction from the day to day pressures of the job. As such the Disaster Recovery plan is often given a cursory review, is not tested, and usually gathers dust in the back of a desk drawer.

On top of that building a resilient Supply Chain does recover real investment. Investment in process redesign, infrastructure, systems, resources, inventories, supplier relationships and more. It can cost a lot of money, and the only apparent return on that investment is the promise of future business disruption mitigation. If you chose to effect a Parallel Supply Chain strategy, which certainly supports resilience, that can be a very expensive proposition.

Source: www2.deloitte.com

It also takes strong leadership and influence to change these paradigms and establishing a power call to action mandate. There are many opposing forces in any organization and it takes a great leader to blast through these barriers and bring people along.

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For instance, implementing a Digital Supply Chain, which is the future, requires a foundation of end to end electronic connectivity across all tiers of suppliers, partners, and customers. That is not a task for the faint of heart. It touches on virtually aspect of an organization and its relationships, processes, skills, and control systems (eg. control towers).

Yet a Digital Supply Chain, whether partially or fully implemented, will make an enormous step to establish Supply Chain resilience. This is because it enables real time visibility to everything going on anywhere in the Supply Chain, with real time alerts informing real time decision making and response. It’s hard to get more resilient than having real time visibility and decision making.

Conclusion

Resilience must be a core construct in any Supply Chain strategy moving forward, for any company in any industry. While we believe the grand solution is to implement a total Digital Supply Chain solution, there are elements that can be implemented on a smaller, less grandiose scale.

Gartner outlines 6 key elements of resilient Supply Chain strategy:

  1. Inventory and capacity buffers
  2. Manufacturing network diversification
  3. Multisourcing
  4. Nearshoring
  5. Platform, product or plant harmonization
  6. Ecosystem partnerships

While we don’t necessarily agree with all of the items (for instance, Nearshoring doesn’t guarantee resilience as would Multishoring) they do provide a framework for building a resilient Supply Chain.

The danger that companies will relax after the pressures of the pandemic are long past, is a very real concern. And the calls for creating resilience may be cast aside, affirming our concern that it is a passing fad.

Resilience has been talked about for decades and the lack of serious consideration was manifested in the disastrous disruptions caused by the pandemic. History will repeat itself unless we take this latest call to action seriously.

Strong leaders must press forward and make resilient Supply Chains a reality, and not a fantasy.

Originally published on July 27, 2021.

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