July 27, 2020
The past two decades have been turbulent for the global supply chain as political, climate and social disruptions continue to pose significant challenges. Most recently, of course, we’ve been contending with the COVID-19 disruption.
In fact, by March of this year, the largest global companies and their suppliers had more than 12,000 factories, warehouses, and other facilities in COVID-19 quarantined areas.1 Most of these facilities have since moved out of quarantine, but the stark lessons of early 2020 underscore an urgent need for resilient supply chains.
Even after global or regional cases of COVID-19 decline, experts believe it might take years for supply chains to fully recover. This means supply chain leaders should be focusing on long-term resiliency.
Resilience is more than a supply chain’s ability to avoid or mitigate the impact of disruptive events; it’s also the ability to recover quickly. Strategic planning needs to understand a wide range of external and internal risks and their possible impacts.
Conventional wisdom tell us that a supply chain is only as strong as its weakest link. This means the resilience strategy must extend beyond an organization’s self‐assessment to include the strengths and weaknesses of its suppliers and partners from raw materials to end consumers.
This fulsome view of the supply chain also identifies opportunities for continuous improvement programs that enable faster pivots for processes and policies as conditions change. For example, the Government of Canada is working with SCI to build resiliency in essential services supply chains through its new a contingency reserve of front-line personal protective equipment (PPE).
Strategic vs. Reactive: Recognizing the Need for Resiliency
As the need for resilient supply chains becomes more prevalent, executives are starting to recognize the important role resilience plays. By next year, almost half (47 per cent) of industry leaders will view supply chain resilience to external disruptions as a strategic priority, which is more than double the number in 2018 (22 per cent).2 Given recent events, that cohort is likely a lot larger.
Despite this attention to strategic supply chain planning and management, many organizations are stuck in a reactive mindset, where the focus is on cutting costs and squeezing out additional efficiencies. This stance limits growth, and increases vulnerability when it comes to disruptive events – the opposite of a resilient supply chain.
When supply chain teams have a seat at the strategic planning table they can get out of cost-reduction mode and start proactively finding ways to manage risk, mitigate impacts, facilitate recovery and design resiliency into every process and partnership.
Why Invest in a Resilient Supply Chain?
If you’re trying to build the business case for a more strategic supply chain management practice, consider that an analysis by Bain shows that companies with resilient supply chains grow faster because they can move rapidly to meet customers’ needs when market demands shift. The analysis also shows that a resilient supply chain increases perfect order rates as much as 40 per cent and increases customer satisfaction by as up to 30 per cent.
Understanding the top line and bottom line contributions of a resilient supply chain are key to moving beyond a reactive approach. A good place to start is working with an experienced 3PL partner that can provide an end-to-end analysis of your supply chain along with a detailed design for long-term resilience and, yes, lower costs and more efficiency.
1. Tom Linton, Bindiya Vakil, Coronavirus Is Proving We Need More Resilient Supply Chains, Harvard Business Review, March 20, 2020
2. Simon Ellis, Jeffrey Hojlo, Leveraging an Intelligent Digital Supply Chain, IDC, March 2019