The reactive vs. proactive supply chain! Which will prevail?

Anyone who has worked in the supply chain knows that problems can arise anytime, anywhere, and anyway. These problems require quick response, acceleration, firefighting, long hours and sleepless nights.

Certainly, the disruptions caused by the pandemic have made reactive supply chain operations the norm in virtually every industry and geography.

How much of this reactivity could or could have been avoided by implementing more robust supply chain strategies? Wouldn’t you prefer to work in a more strategic and less hectic organization?

Everyone runs around with their heads cut off

Even before the pandemic hit, it was common practice for most organizations to have a supply chain team that needed to respond in real time to unforeseen circumstances.

Late shipments, supplier quality issues, facility downtime, resource shortages, defective materials, lack of inventory, production capacity and quality issues, fluctuations in demand, natural or man-made disasters, and more all impact production and shipping stops.

And when those issues arise, the supply chain team is called to action. You need to understand the problem and find immediate, if not temporary, solutions. The heat is on. adrenaline flows. All other work is suspended. And attention from the CEO down is intense, which is a dramatic understatement.

I have experienced these nightmare scenarios many times as a high priced freight forwarder. Unfortunately, extensive experience solving parts shortages made my team and I so good at this firefighting that the CEO would call us in at any situation to fix things quickly, even though it wasn’t our “day job”.

Expediting is a very tough job. And the people who do that are real heroes who don’t always get the credit and recognition they deserve for getting a company back on its feet. Still, they get the job done and move on.

The reactive supply chain has historically been accepted as a standard reality and responsibility that only needs to be managed as the circumstances warrant.

Now throw a global pandemic into the mix. Since late 2019 and for many years after, the coronavirus pandemic has exposed the vulnerability of supply chains everywhere. It’s hard to name a single product, industry, company, or element of a supply chain that hasn’t been disrupted.

While supply chain reactivity has historically been a sporadic activity, in the wake of the pandemic, supply chain reactivity has become the dominant, if not all-consuming, activity for everyone, everywhere. Strategies were discarded. Each action focused on dealing with the hourly and daily disasters and fires and extinguishing them as quickly as possible, then moving on to the next problem.

It is understandable that this would be the short-term focus. The pandemic required a reactive response and focus.

But the question is, wouldn’t a more robust and proactive supply chain reduce the severity and occurrence of problems?

So many times I have heard people say that they are too busy fighting fires to do the work of improving processes that they could spend less time fighting fires. The result is that they continue to spend all their time fighting fires.

Obviously, this kind of thinking leads to the self-propagation of reactive scenarios over and over again.

The proactive supply chain

If you could make supply chains more resilient, it would significantly reduce, but likely not eliminate, the number of reactive situations that occur. You could spend your time on more strategic initiatives, intellectual endeavors, development and competitive differentiation.

The basic trick to creating a more resilient, proactive supply chain is to have leadership committing the time and resources to undertake these proactive activities.

Without that leadership and vision, organizations will continue to be sucked into the morass of acceleration and firefighting. With this leadership and sponsorship, organizations can devote time to a range of activities that will strengthen their supply chains before the next impending disaster.

Some of the steps that can be taken to create more resilient and proactive supply chains include:

  • dual sourcing
  • Disintermediation and waste disposal (reducing the possibility of errors and disruptions)
  • Both onshoring and offshoring, not just one or the other
  • Both outsourcing and insourcing, not just one or the other
  • Pre-qualification of alternative suppliers
  • Multiple logistic channels, production and distribution facilities
  • Parallel supply chain implementation
  • Backup systems, data, processes and resources
  • Strategic inventory reserves and stock levels
  • Implement full end-to-end electronic connectivity and visibility
  • Build a digital supply chain with control tower processes and real-time decision making and risk management

Implementing several of these measures will reduce the occurrence and duration of supply chain disruptions. Implementing the full complement of these measures will dramatically improve a company’s supply chain performance compared to any competitor, as incidents are fewer, resolved more quickly, its business further strengthened, and its business moving forward faster.

Now that doesn’t mean there won’t be incidents. Take the global pandemic, for example. The scale of the disruption was so extensive that even the best (e.g. just-in-time) supply chains faltered.

But the goal isn’t really to eliminate supply chain failures. Something disturbing will always happen. The goal is to reduce these events and their impact, improve time to resolution, and increase recovery speed.

Conclusion

There will always be disruptions in the supply chain. There will always have to be an ability to respond to and resolve these disruptions.

But these interruptions are costly. They do not contribute to morale or customer satisfaction or profitability. Therefore, it is important to drastically reduce both the occurrence of these incidents and the time to resolution.

Because of this, there is a need to create more robust, proactive supply chains. The companies that take these proactive steps will not only survive better than the reactive supply chain companies, but they will also be the companies that will prevail.

The moment of truth in the supply chain has arrived and we must take the proactive path.

Originally published May 17, 2022.

Leave a Comment