If you spend your career in any specific field, you will see themes and trends and moods and styles and eras come and go over the course of your working life that are defined by a single issue or pressure or innovation that shapes everything else you do for a time. Supply Chain professionals are no different, and right now as we come out the far side of a pandemic, we are in an extended moment where frequent disruptions of all shapes and sizes are now accepted as a business norm, and all anyone wants to talk about is building resiliency and agility into their organizations.
These are not new ideas, of course, but right now they are must-haves in a way that feels fresh and new and above all urgent.
Ten years ago, everyone working in Supply Chain was trying to build efficiencies into global value chains. Making things faster and cheaper while improving visibility and staying ahead of both regulatory requirements and ever-evolving customer expectations were where a lot of very smart people were putting all of their energies. Technology was unlocking all sorts of new capabilities to drive positive change. People talked about ‘World-Class Supply Chains’ in hushed tones, and only a very few companies had the confidence to say they were running one. Everyone else talked about being on a journey to get there.
Today, almost every one of those beautiful high-performance supply chains that had been labored on and polished up and over-engineered like a Swiss watch are now in the process of being broken up as too big, too narrowly focused, too vulnerable to the unexpected.
The future —at least for the next decade— is going to be above breaking those global supply chain networks into smaller and more autonomous but still interconnected pieces, and while there will always be products made on the far side of the world, there will be less emphasis on perfecting the cost and speed to market of those goods, and more emphasis on creating alternative means of sourcing, production, and distribution for each market, even when that involves duplication, and even when that does involve paying a little more to have multiple sources.
Redundancy, once one of the great targets for efficiency-seeking supply chain executives, is now a fundamental building block of assembling a supply chain that can roll with the punches and keep delivering without customers noticing there was an issue.
Just-in-Time Delivery from anywhere to anywhere at a reasonable and hopefully always improving price point is a beautiful idea, and when it worked —and let’s be honest with ourselves, very few companies ever really got it to work seamlessly— it was a wonder to behold and worthy of being called ‘World-Class,’ but at the end of the day supply chain professionals need to get things to where they are needed on time in the quantity and quality expected, and in today’s rapidly changing business environment where contingency and agility and resiliency and all the other words that promise, “Something is going to go wrong, but we’re going to make it work anyway,” is the order of the day, it is time for a fundamental rethink of what improving a supply chain looks like.
Where there is such dramatic change, it is always worth taking a moment to say, “As long as we are changing anyway, how can we do better for ourselves and for our customers than our competitors?”
Let’s get into that.
Building Competitive Advantage
All over the world, businesses are redesigning their networks to think about operating on the city/state/country level rather than the country/continent/hemisphere level. New suppliers are being sourced and developed. New 3PL partnerships are being set up where regional capabilities and capacities are key points of discussion. New thinking is informing infrastructure development. New strategies are being developed to continue to meet and exceeding the needs and wants of customers who are aware of supply chain bottlenecks in theory, but in practice will spend their money with whoever can fulfill their order as well or better than they had come to expect in 2019, regardless of what has happened since.
In all of these important conversations and interactions and decisions and collaborations, supply chain leaders have the opportunity to continue the long-standing tradition of transforming their function from a business cost to a competitive advantage.
Here are a few ideas to keep in mind as companies create their next decade of operating within a more regionalized and localized network:
Energy usage in terms of both cost and environmental footprint – We can begin with a pretty easy and obvious starting point. A shorter supply chain uses less fuel to move things around, and redesigning a logistics, distribution, and fulfillment network with new partners will offer opportunities to rethink and reevaluate how and where things are moved. Not everyone is going to invest in an electric fleet, but many companies will. Some locations have lower energy costs to operate, or more opportunities to reduce environmental impacts as the footprint and network are established. There are companies investing in green energy to meet the needs of their changing footprint. Knowing your options and making choices that positively impact Scope 3 performance and ESG reporting is going to make greener supply chains more valuable.
Available labor, talent, and opportunities for automation – Again, a new network partnering with a new ecosystem of suppliers and service and solution providers will offer supply chain leaders all sorts of opportunities to go where the people they need are, and finding local expertise in different locations is only going to build resiliency into a supply chain organization while also in time broadening and deepening the pool of rising top talent the company can draw from.
Improving customer-centricity — A localized and regionalized supply chain with the autonomy to make many of its own decisions is going to be able to respond to changing customer tastes, fashions, moods, needs, and wants much faster than the globe-spanning supply chains of the pre-pandemic era where the same factories in China or some other centralized location is making products for every market at the same time. The lead time to course-correct forecasting and sales and operational planning based on customer behavior is dramatically reduced as supply chains shorten and as local suppliers are looking to fill more specific orders.
Debottlenecking logistics and broadening procurement options is an investment in the future — The whole shift towards regionalization and autonomy in the pursuit of resiliency in supply chains is driven by how vulnerable long supply chains and single sources of supply are in an era of frequent disruption, but as long as companies are making the shift towards self-governing localized supply chains on a market-by-market basis, why not build each of these networks on the understanding that diverse options to do the same thing is worth paying a little more to mitigate the possibility of ever relying on one disruptable chokepoint? Also, by investing in multiple options, you are building relationships with a broader network of partners who will have it in their best interest to work with you through difficult times to keep your business and grow their own to be better positioned for when supply chain optimization based around efficiency rather than resiliency comes back into vogue. There are going to be smaller, more costly options today who will be the bigger and perhaps more innovative options of tomorrow based on the success and investment they generate during this age of disruption, and large organizations that take some of these regional up-and-coming companies under their wings now are only going to see shared long-term benefits from having built these bonds out of necessity in the beginning and then out of mutual win-win outcomes over the years.
Each autonomous regional supply chain is an innovation center sharing success and lessons learned with the larger organization — Speaking of investing in the future, it should be emphasized that giving autonomy to individual markets creates opportunities for experimentation with technology and tactics on a case-by-case basis with local talent in local conditions, but there is still an overarching supply chain organization that can cross-pollinate what works and what doesn’t between the networks so different groups are not all responsible for re-inventing their own wheel or learning from their own errors. The senior supply chain leader who has concerns about giving up day-to-day control of different areas will find they have more than enough to do coordinating between the regional groups who are working in parallel to solve similar challenges and take advantage of similar opportunities. How can the success of one area be translated to another, and at what point is it worth changing what others are doing to embrace something that has been proven to work elsewhere? Perhaps one of the greatest benefits of the Age of Resiliency will be having multiple teams working on the same issues and seeing how individual answers compare when faced with universal questions.
Final Thoughts
Of course, this list could go on and on, and each of those paragraphs could be its own column. The biggest takeaway I want to leave senior supply chain executives with is that market forces are pushing this move towards regionalization and autonomy whether we like it or not. The majority of businesses have to respond to those forces, but that does not mean we cannot be proactive in how we respond. Put in the extra thought. Be deliberate. Every decision that builds responsiveness, agility, versatility, and resiliency into your organization is also an opportunity to build competitive advantage if you look at all the angles first and then choose accordingly. Meanwhile, if decentralization is the order of the day, empower those autonomous and semi-autonomous regionalized supply chains to innovate local solutions for local conditions drawing from their local talent, and just watch how innovations from one area will translate into another.
We can miss the days where supply chain optimization was about cost and speed, but in solving for disruption, we might just be creating the next generation of Big Ideas supply chain professionals will be embracing for decades to come, many of which will still end up costing less and working faster in the long run once we have time to perfect them at the regional level.
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Geoff Micks
Head of Content & Research
Executive Platforms
Geoff joined the industry events business as a conference producer in 2010 after four years working in print media. He has researched, planned, organized, run, and contributed to more than a hundred events across North America and Europe for senior leaders, with special emphasis on the energy, mining, manufacturing, maintenance, supply chain, human resources, pharmaceutical, food and beverage, finance, and sustainability sectors. As part of his role as Head of Content & Research, Geoff hosts Executive Platforms’ bluEPrint Podcast series as well as a weekly blog focusing on issues relevant to Executive Platforms’ network of business leaders.
Geoff is the author of five works of historical fiction: Inca, Zulu, Beginning, Middle, and End. The New York Times and National Public Radio have interviewed him about his writing, and he wrote and narrated an animated short for Vice Media that appeared on HBO. He has a BA Honours with High Distinction from the University of Toronto specializing in Journalism with a Double Minor in History and Classical Studies, as well as Diploma in Journalism from Centennial College.
