Perpetual Disruption Requires Perpetual Adaptability
To succeed in today’s business landscape, organizations must navigate perpetual disruption. That’s the theme of my latest book, Insightful Leadership: Surfing the Waves to Organizational Excellence.
Today’s disruptions target all aspects of business, but particularly supply chain. Supply chain disruptions come in two different types of waves: tactical and strategic. Each requires distinct approaches when building supply chain resilience.
Tactical Disruptions and Adaptability
Tactical disruptions happen all the time. Often unpredictable, they affect short-term, daily operations.
Such unexpected events could force supply chain managers to deal with fluctuating sales volumes. You may face demand for different or a broader variety of products or services. You might have to use technology to embrace optionality.
Such supply chain vulnerabilities require a high degree of adaptability within existing supply chains.
1. Increased demand variability: A common tactical disruption. Sudden holiday sales spikes deplete safety stocks. Or economic downturns leave you with too much inventory, increasing costs. Agile supply chains use robust demand forecasting tools and adaptable production schedules that can scale up or down.
2. Customers demand variety: Consumers expect a wide range of product and service options, which can strain supply chains. Companies should use flexible production techniques, work with multiple suppliers and be prepared for ongoing requests for new services. That can help you quickly pivot to produce different products and/or services without significant delays or cost increases.
3. Technological changes: Leveraging technology can enhance optionality. Advanced analytics, the IoT and AI can provide real-time insights into supply chain operations. Such insights help you make quicker decisions and allocate resources more efficiently.
Strategic Disruptions and Scenario Planning
Strategic disruptions, on the other hand, are more profound and long-term. They often require a fundamental shift in how you structure and manage your global supply chain.
You could change sourcing strategies by moving production from China to India. Or you could source raw materials from Africa and South America. You could expand market reach from B2B to B2C. Whatever you choose, you must embrace such optionality.
1. Sourcing shifts: Geopolitical tensions, trade policies and cost are forcing many companies to rethink sourcing strategies. The complex process of moving production from one country involves evaluating new suppliers, understanding local regulations and protecting quality. Scenario planning becomes essential, allowing companies to anticipate potential challenges and develop contingency plans. Nearshoring, reshoring friendshoring and regionalization become even more important.
2. Market expansion: Expanding from B2B to B2C markets introduces new dynamics into supply chain. B2C operations require faster delivery times, more personalized customer service and greater branding and marketing. Companies must invest in eCommerce platforms, final-mile delivery and customer relationship management systems to succeed.
3. Increased optionality: To build strategic resilience, companies must increase their optionality – the ability to choose from multiple viable alternatives. You can achieve optionality by diversifying the supplier base, investing in multiple production facilities and maintaining strategic stockpiles of critical materials. Optionality ensures that your company does not overly rely on a single source or strategy, reducing vulnerability to disruptions.
Resilience in Supply Chain Requires a Dual Approach
Building resilience in the face of both tactical and strategic disruptions requires a dual approach.
For tactical disruptions, your teams should make existing supply chains more adaptable. You must invest in technology, foster a culture of agility and improve operations. Your company must have alternate sources of raw materials and other inputs. Your organization must be ready for natural disasters or manmade disruptions.
For strategic disruptions, scenario planning and increased optionality are key. Companies must hold regular scenario planning exercises to identify potential risks and opportunities. Maintaining optionality in your supply chain strategies can help you quickly adapt to changing circumstances. Optionality can help your company seize new opportunities when supply chain challenges arise.
Supply chain risk managers must acknowledge that tactical and strategic disruptions are coming at an increased pace. Ongoing profitable growth requires deploying responses quickly, with minimal interference with daily operations.
The better the work done on creating optionality, the smoother you will be able to match supply and demand. the moving between strategies will occur, the goal is smooth and quick
Optionality Creates Resilient Supply Chains
With disruption as the new normal, companies must develop tactical and strategic resilience. By embracing adaptability and optionality, organizations can not only survive but thrive.
As supply chain leaders, we have the responsibility of guiding our teams through these difficult times. We must be smooth and quick to catch the next wave of disruption. Riding that wave is the only opportunity for profitable growth in the future.
Related Reading
- Supply Chain Resilience Requires Amazon + 3PLs
- What About Supply Chain Strategy?
- Innovation Trifecta Can Deliver Supply Chain Resiliency
- How Regionalization Can Be as Profitable as Globalization
Jim Tompkins, Chairman of Tompkins Ventures, is an international authority on designing and implementing end-to-end supply chains. Over five decades, he has designed countless industrial facilities and supply chain solutions, enhancing the growth of numerous companies. He previously built Tompkins International from a backyard startup into an international consulting and implementation firm. Jim earned his B.S., M.S. and Ph.D. in Industrial Engineering from Purdue University.
