I have a lot of conversations with supply chain executives in my line of work. Executive Platforms organizes the long-running and successful North American Supply Chain Executive Summit series, and is launching a European series as well, but of course supply chain content is integral to our manufacturing summit series, our food safety and quality series, our pharmaceutical and biopharmaceutical series, and our sustainability series as well.
Something fundamental has changed in the nature of those conversations over the last year or so, and I missed it for a little while in the background hum of organizations weathering the storm of a global pandemic and all the crises large and small that came with that. This past September, though, someone clarified the shift for me with a single sentence:
“Process optimization has always been part of our job, but where for most of my career it was always about trying to save time and money, now all I want to do is make my supply chain more resilient without it costing me a lot more time and money.”
I have repeated variations of that statement at least a dozen times since, and so far no one has disagreed: Supply Chain process optimization is now about making it work no matter what happens, and there is a lot of important work being done right now to make that adjustment in philosophy happen even when it flies in the face of the last several decades of efficiencies where reducing cost and increasing speed were the great motivators of the best and brightest the discipline had to offer.
That is a startling thing to say out loud.
I have touched on current supply chain challenges several times before here without connecting the common thread running through all of these issues. In the same way COVID-19 accelerated existing trends in Digital Transformation and the Nature of Work across almost every industry, the pandemic and its knock-on effects has also accelerated the rate and scale of disruptions such that global networks and just-in-time delivery have moved from ideals to ideas that fail to meet any kind of strenuous Risk analysis.
Today, companies are moving to regional networks of sourcing, production, and distribution whenever possible, and the very idea of sole sourcing or dependency on a specific transit hub is anathema.
Today, companies are stockpiling inventory whenever it is cost effective to do so, because it is better to have enough to run for an extended period of time even if it means spending capital up front rather than face unexpected downtime. Just this week I was speaking to a contract manufacturing organization that stockpiled 18 months’ worth of must-have operating perishables before opening a new facility, and that certainty of supply has proven a powerfully persuasive competitive advantage to the industry it serves.
Today, companies are turning to increasingly sophisticated AI and other digital tools both to understand current business conditions and also to rigorously apply Risk Management to networks and processes that were once the goal of world-class supply chains but now must be viewed with suspicion. In the quest to build any high performance system, decisions were made that enhance some qualities to the detriment of others. Careers have rightly been made on supply chains that made the transition from the cost of doing business to a profit center and competitive advantage, but so many of those organizations have Achilles Heels that now stand vulnerable to the slings and arrows of near-constant disruptions of all shapes and sizes. Sooner or later too much stress will be applied from different angles on a regular basis to a system fine-tuned and polished over many years to do one thing very, very well, and when that system ceases to function, how well it functioned before will not amount to a hill of beans to the people responsible for its continued success.
Choose Your Adjective
Choose your adjective: Supply chains now need to be robust, agile, versatile, nimble, responsive. Of course, none of these are new ideas. A dozen years ago you would see just as many conversations about enhancing visibility and traceability in service of understanding what is going on and making informed decisions as you have today, but now instead of optimizing speed and revenue, all of is directed towards a harsh new question: Is your supply chain resilient enough? Keep in mind, you cannot know exactly what ‘enough’ means when you answer the question, but the answer still needs to be a confident ‘Yes,’ because if it’s not, that’s as good as admitting you expect it to fail at some point.
In a world of constantly evolving customer expectations and a rapidly changing business landscape, your supply chain either gets the job done or someone else will step in and do the job instead. No one is going to wait for the world-class supply chain of yesteryear to mend itself in light of new circumstances if a competitor stands ready to fill the void. The change in philosophy and the capabilities to deliver on the promise of that ‘Yes’ needs to be happening right now.
What Does That Change Look Like?
Now the news is not all bad. In the service of resilient supply chains, business leaders have a wealth of service and solution providers to call upon. There has probably never been a better time to reevaluate the toolbox and seek outside expert opinions.
They also have the advantage of everyone in the supplier network feeling the same pressures and looking for shared solutions. Collaboration and coordination up and down the value chain and even between similar companies that are not direct competitors has never had stronger incentives to opt-in and more dire consequences for the company that chooses to go it alone.
I have even heard a mentality of honest conversations about sharing the pain a little more evenly has entered into contract negotiations where long-term working relationships have perhaps been revealed as lopsided in light of current business realities.
The move towards customer-centricity is only accelerating, but how companies choose to get there is no longer being channeled through the lens of Lean thinking applied to process optimization. Freed from that constraint —and, in fact, seeking supply chain choices that specifically are as constraint-free as possible— will allow supply chain planners to really rethink and reinvent their operations under a new guiding light: It just has to work, no mater what. There always needs to be a Plan B. There always needs to be a fallback, a safety net, and the ability to move to that Plan B or commit to that safety net at the right moment to make the difference.
The disruption might be COVID-related, or workforce-related, or revolve around a natural disaster, or a host of social and political tensions regionally and globally. The disruption might be the failure of a business partner, or commodity price fluctuations, or a ship getting stuck in a canal. We cannot imagine a complete list, because the last few years have shown us the list only gets longer the more you think about it.
It falls to Supply Chain leaders to build in their contingencies, prepare their systems, workshop and wargame their worst-case scenarios, and brace for impacts from directions they may never have seen before, all in the service of Supply Chain Resiliency that everyone hopes will not be called upon, but no one now dares not invest in for fear of being left without options when the next shoe drops.
The Future
The future of Supply Chain is Supply Chain Resiliency. For the next few years at least, all conversations will return to this concept in some way, and there is something freeing in that certainty. People really can innovate and experiment to address the most important thing happening in their profession today. The businesses that can reliably keep things moving on time in the quantity and quality expected no matter what will come out on top, even if it costs a little more than some of their competitors are spending during optimal conditions. When disruptions hit —and there seems no end in sight to the increasing frequency and scale of disruptions— the resilient supply chains will deliver what and when the cost-optimized supply chains cannot.
The competitive advantage businesses must focus on has shifted from time and money to reliability. It is the kind of dramatic sea change in priorities people see only a couple of times over the course of their careers, and we are living through it right now.
It is an exciting time to be talking about supply chains. You will hear more from us about this on an ongoing basis.
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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.
