The global pandemic has severely impacted supply chains but has also shed light on how better supply chain management can best be leveraged as a forward-looking strategy. The world has launched into an uncertain future. But crises generate opportunities as well as casualties. Supply chains must act with urgency to invest in three entwined capabilities, which are together key to success: agility, resilience, and sustainability.
Why agility matters
Simple supply chains can work well if there is no disruption. Unfortunately, in the future, we cannot count on normal, but we can count on agility. Companies with agile supply chains outperform their peers. The 10% of firms categorised as supply chain masters by Accenture achieved 13% higher revenue growth, and one of the four commonalities across these firms was an investment in agility, which was mission-critical during a disruption.
When times call for it, capabilities to take actions like shorten planning cycles, rationalise SKUs, shift production lines to entirely new products, or scale up omnichannel are enabled by agility.
Preparing for resilience
The second factor to consider is resilience, which enables supply chain continuity despite disruptions. While it may seem uncertain what steps a supply chain may need in a crisis, agility will make those steps easier to execute. If an organisation is prepared to continue production despite an interruption, such as a factory closure, it has built in resilience. However, if there is no agility to make that switch, any built-in resilience is useless.
Responsiveness alone is not enough, however, if the business hasn’t made the relevant plans in the first place. Resilience is sometimes defined as the ability to bounce back, but since there is no going back, an alternative definition – recovering quickly and adjusting easily – may be more appropriate.
Importance of sustainability
The third key to a successful supply chain is sustainability. Stakeholder capitalism increases resilience while also addressing sustainability. For example, mitigating even low-probability risks like pandemics is important for resilience, so increasingly leaders are looking beyond financial measures to assess environmental, social and governance (ESG) factors. Sustainable finance professor and consultant Rodrigo Tavares points out that ESG investing has increased and companies highly-rated on ESG have outperformed their peers. These efforts to make companies more sustainable in their operations require increasing efficiency and reducing waste in ways that result in greater agility and resilience as well as better returns.
There is a growing consensus that the planet faces a “climate emergency,” which also creates risk for firms, illustrating another way resiliency and sustainability are linked. But while both these capabilities alongside agility are key to supply chains future success, they need enhanced visibility to provide a foundation across all of them and help realise their full value.
Bringing it all together
Visibility enables organisations to see what is happening, but full transparency makes clear the impact of decisions on the whole network with capabilities like running scenarios to compare alternatives. With concurrent planning and the agility it affords, organisations can act quickly to respond, weighing any decision against metrics that consider both resilience and sustainability. We are living in an age of uncertainty. Investing in agility, resilience, and sustainability on a foundation of visibility is like buying insurance – you pay a known cost now to reduce risk exposure from catastrophic future disruption. Organisations cannot afford to wait. The time is now.