In a world where supply chain disruption is wide-ranging and unrelenting, supply chain leaders need to embrace and adapt to change, or risk falling behind. To jump the disruption curve, they must lead their organizations to Resilience 2.0, the next level of agility where adaptability and flexibility are built into the very foundation of the company.
The Allianz Risk Barometer ranked business disruption as the top risk seven times in the last decade. Forward-thinking supply chain leaders need to embrace disruption as the new normal. Disruption separates winners from losers. To gain competitive advantage, leaders must hone their ability to predict and react quickly to change. This is Resilience 2.0. Following is what’s required to achieve it.
Build a culture of resiliency. Resilience 2.0 calls for going beyond the past focus on efficiency, which required carrying less safety stock, limiting redundancy and having a lean network. Those were great strategies for reducing costs, but not for enabling flexibility. Leaders must build a culture that values resiliency and makes investments to support agility and flexibility in the business. They must drive counterintuitive moves such as increasing inventory reserves to absorb shocks and adding nodes that can flex with demand. At the same time, they must align all stakeholders around investments in automation to reduce dependence on labor, and implement intelligent software to help predict, recognize, and react quickly to changes.
Get great at evaluating and managing risk. Seizing opportunities in this disruptive environment also means taking on higher levels of risk. Resilience 2.0 calls for supply chain leaders to enhance capabilities to detect, assess, quantify and mitigate risks — making risk management a continuous and proactive exercise. They’ll need to manage their company’s appetite for risk, sometimes persuading executives to increase risk tolerance to take advantage of opportunities.
Drive outside-in thinking. Resilience 2.0 calls for leaders to have an intense focus on where global markets are heading, so they can “skate to where the puck will be.” They must:
- Be aware of where their industry, the market, and the global economy are heading;
- Monitor how customer expectations are changing in terms of product mix, channel, delivery node, and speed;
- Understand their suppliers and partners, knowing the environment they operate in and the impact of events on their ability to deliver, and
- Translate all of that into specific initiatives, and sometimes significant investments, that push the company forward profitably to deliver the EBITDA required by shareholders.
Embrace digital transformation, cautiously. Digital transformation is key to Resilience 2.0. Intelligent software can help companies anticipate and respond quickly to micro signals. Automation helps speed up fulfillment and reduce dependence on labor fluctuations. But leaders need to approach digital transformation with caution. They should make a series of “no regrets” decisions that get them closer to where they want to be, but not so far down a path that they can’t pivot quickly. Technologies, too, need to be flexible and scalable, so they don’t need to be replaced when the next disruption occurs.
Outlook:
Forward-thinking supply chain leaders know that disruption will be ongoing, and that embracing it is an opportunity to gain competitive advantage. Organizations that prevail will be ones that invest now in their ability to react quickly to change. They’ll achieve the next level of agility: Resilience 2.0, where adaptability and flexibility are built into the very foundation of the company.
Andrew Breckenridge is executive vice president with Fortna.
