Ever since the coronavirus pandemic exposed the fragility of the global supply chain, the word “resilience” has become the latest buzzword.
Everyone is talking about making supply chains more resilient and resilient as if it had never been addressed in the past. The danger is that with vaccines rolling out globally and a return to normal, albeit a new normal, in the near future, people will quickly forget what we’ve all just been through.
People will fall back into their old, comfortable ways and far too many will forget the need to embed resilience into their supply chains. Because of this, we wonder if 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 that we wonder if people really understand what it means to be resilient. Just saying you want a resilient supply chain isn’t going to do anything. You need the vision, leadership, strategy and resources to implement this capability.
According to mixmov.io, “Supply chain resilience is the ability of a supply chain to be prepared for unexpected risk events. When you have a resilient supply chain, you can quickly respond to these disruptions and recover, returning to the original situation or moving to a new, more desirable state to increase customer service, market share, and financial performance. “
SAP Insights states that “a resilient supply chain is defined by its resilience and its ability to recover. That means being able to withstand, 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 understandable. Things happen and it happens all the time. Man-made disasters, natural disasters, and large and small disruptions occur all the time somewhere in the world. As such, it makes sense that your supply chain should be designed to anticipate that disruptive forces will eventually be at play and be able to address and mitigate any impact as quickly as possible.
Given that these goals are likely shared by most companies and the people who run them, it’s odd that supply chains aren’t designed for resilience. The evidence that supply chains have not been resilient is that otherwise we would not have witnessed the massive, widespread and unprecedented global disruption caused by the pandemic.
I know I’m not the only one who walked into stores in 2020 only to find the shelves empty with everything from toilet paper to groceries and household goods. Where was the resilience?
This is why we worry when people pay lip service to resilience. Logically, resilience makes sense. But human nature is such that when pandemic restrictions are eased, we will simply fall back into our old ways and talk of resilience will be a passing fad.
Why are we facing this uncertainty and lack of sustained determination to build resilient supply chains?
So what’s the problem?
The article “Supply Chain Resilience Report 2020 released” by logisticsit.com states: “Over 96% of global companies are now planning to take action to increase the resilience of their manufacturing supply chains. However, more than half (52%) admit they have not yet embarked on this journey.”
Given that 52% hadn’t even started during the pandemic’s pressure cooker, we suspect that as things ease up post-pandemic, an even larger percentage of organizations are at risk of abandoning a resilience strategy.
Risk management is a challenge under the best of circumstances, let alone when you’re in the midst of a disaster that threatens the very survival of your business. It’s a balancing act of Cirque Du Soleil caliber.
A tremendous part of the challenge of envisioning and implementing a resilient supply chain is that it requires a significant paradigm shift that runs counter to many core supply chain principles that we have followed 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 intention of creating resilience and resilience.
Think about how many times you’ve been asked to review a disaster recovery plan. For so many people, it’s an unwanted distraction from the daily pressures of work. As a result, the disaster recovery plan is often only superficially reviewed, untested, and usually gathers dust in the back of a desk drawer.
Additionally, building a resilient supply chain brings back real investment. Investments in process transformation, infrastructure, systems, resources, inventory, supplier relationships and more. It can cost a lot of money, and the only obvious return on that investment is the promise of mitigating future business disruption. Choosing a parallel supply chain strategy that certainly supports resilience can be a very expensive proposition.
It also takes strong leadership and influence to shift these paradigms and establish a power mandate to call to action. There are many opposing forces in any organization and it takes a great leader to break down those barriers and bring people along.
For example, implementing a digital supply chain that is the future requires a foundation for end-to-end electronic connectivity across all tiers of suppliers, partners and customers. This is not a task for the faint of heart. It touches on the virtual aspect of an organization and its relationships, processes, capabilities and control systems (e.g. control towers).
Nevertheless, a digital supply chain, whether partially or fully implemented, will take a huge step towards creating supply chain resilience. This is because it allows real-time visibility into everything that’s going on anywhere in the supply chain, with real-time alerts informing real-time decisions and reactions. It’s hard to become more resilient than having real-time visibility and decision making.
Resilience must be a core construct of any future supply chain strategy for any company in any industry. While we believe the grand solution is to implement a full digital supply chain solution, there are elements that can be implemented at a smaller, less grandiose scale.
Gartner outlines 6 key elements of a resilient supply chain strategy:
- Inventory and capacity buffers
- Diversification of the production network
- Platform, product or facility harmonization
- ecosystem partnerships
While we don’t necessarily agree with all of the points (nearshoring, for example, does not guarantee resilience like multishoring), they do provide a framework for building a resilient supply chain.
The risk of companies relaxing long after the pressures of the pandemic have passed is a very real concern. And the calls to build resilience can be brushed aside, reinforcing our concern that this is a passing fad.
Resilience has been talked about for decades and the lack of serious consideration has been evident in the devastating disruptions caused by the pandemic. History will repeat itself if we don’t take seriously this latest call to action.
Strong leaders need to push forward and make resilient supply chains a reality, not a fantasy.