Written by Sue Williams, supply chain specialist and Managing Director of Hexagon Consultants.
ARE YOU RISK READY?
The past year has highlighted the importance of organisational resilience – the ability to respond and recover in the face of challenge. As a supply chain specialist, this is familiar territory to me. Through my 25 years’ experience of delivering performance improvement at organisations such as Dyson, BAE Systems, Jaguar Land Rover and, most recently, leading the supply chain assurance and planning teams for the Vaccine Taskforce, I have become acutely aware that resilience is essential for a healthy supply chain.
We may be emerging from the COVID-19 crisis, but markets remain uncertain. Supply chains in particular face considerable volatility, with demand behaviour changing, increased competition and costs, and shorter, more complex product lifecycles. Trends such as elastic logistics, new technologies, reshoring and circular supply chains are driving changes to operating models.
Against this backdrop, how can organisations go about improving the resilience of their supply chain?
As a starting point, rather than focusing on discrete aspects of your supply chain such as procurement, logistics or IT, focus on it from end to end. Is your full supply chain capability aligned to your organisation’s strategic objectives? How are the links in the chain interdependent?
A supply chain consists of multiple interdependent elements, from sub-tiers and tier 1 suppliers, through manufacturing, and on to distributors, retailers and finally customers. This creates a house of cards effect: a problem with a sub-tier supplier on the other side of the world can be enough to bring the whole thing tumbling down and stop your production flow.
Given this complex context, it is essential to take a positive, proactive approach to building a resilient supply chain.
Although issues will arise that are out of your control, there is much you can do to protect yourself against them. The most resilient organisations acknowledge that risks are an inherent part of their supply chain, accept they can’t protect against everything, and take a pragmatic, practical approach to addressing vulnerabilities. What are the risks? How likely are they to create a problem? What is their potential impact? Do they need to be resolved immediately, or over time? Are there risks that can’t be fixed but need tracking?
SUPPLY CHAIN MAPPING
The most effective way to answer these questions is through supply chain mapping. This involves creating a map of the key elements in your supply chain, identifying vulnerabilities and addressing them as appropriate.
Focusing on different categories of risk can be a helpful starting point.
As this shows, some risks have external drivers, while others have internal drivers (triggers that are specific to your supply chain). Whether external or internal, it is important to accept that you cannot always predict or prevent these risks. The supply chain picture is extraordinarily dynamic; whether it’s trade disputes or financial instability of a supplier, the issues you face today are likely to be different to those creating complexity in six months’ time. Establish a constant review cycle that enables you to recognise risks early and assess their potential impact on your business.
Supply chain mapping can seem daunting if your business is large and complex. I advise organisations to do a top-level review of immediate vulnerabilities before drilling down into specific risks in more granular detail. For example, you might identify IT as a major vulnerability, recognise that your expensive ERP/MRP system is underused, and then carry out a detailed internal review of people capability, processes, equipment and facilities to assess the risk this creates. What would be the repercussions if the system collapsed? What can you do to mitigate the risk? Do you have the infrastructure in place to adapt quickly if the IT risk becomes an issue?
As already highlighted, your supply chain is only as resilient as its suppliers. Ask them to provide evidence of their own resilience planning and, if a supplier is particularly integral to your operations, carry out desktop assurance and map their supply chain as well as your own.
KNOWLEDGE IS POWER
My key message? Supply chain resilience is an essential part of business continuity planning and needs to become business as usual. As well as identifying risks, your supply chain mapping exercise can identify productivity, efficiencies, improvements in service levels and opportunities to optimise inventory. Don’t ignore it!
Think about how you can combine supply chain mapping with business improvement plans. It doesn’t need to be a complicated, expensive exercise and will help you to identify opportunities, as well as vulnerabilities. Could you streamline processes? Could your supply chain design be tweaked to better meet the needs of your business? Could you improve the offshoring/onshoring supply balance?
None of us know the specific challenges that lie ahead for supply chains in the EME market. However, by increasing your understanding of your own supply chain and starting to mitigate the risks, you will be ready to respond and recover. When it comes to supply chain resilience, knowledge is power.