Jump The Disruption Curve with Resilience 2.0

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 curve of disruption, they must lead their organizations to Resilience 2.0, a next level of agility where adaptability and flexibility are built into the very foundations of the company.

Supply chain leaders have always faced challenges on several fronts. But disruptive events have become the new normal, and they are now happening with greater frequency and on a global scale. Things like port congestion, transportation capacity constraints, labor shortages, global health crises, social unrest, raw material shortages and significant weather events explain why the Allianz Risk Barometer ranked business disruption as the top risk seven times in the last decade.¹

Forward-thinking supply chain leaders know that disruption is here to stay, and that embracing it is an opportunity to gain competitive advantage. They cultivate and hone the ability to predict and react quickly to change. They learn to expect the unexpected. We call this Resilience 2.0 – and here’s what is required.

Build a Culture of Resiliency

In the future, only the most agile companies will survive. The relentless pursuit of efficiency has diminished the ability of organizations to respond quickly to disruptive events. Carrying less safety stock, limiting redundancy, and having a lean network are all great for reducing costs, but not for enabling flexibility.

Resilience 2.0 means balancing the drive for efficiency with the requirement to be agile. Today’s leaders are doing things like building back inventory reserves to absorb shocks, adding nodes that can flex with demand, investing in automation solutions to reduce dependence on labor, and implementing intelligent software to help predict, recognize, and react quickly to changes. And they are building a culture that values resiliency as a way to make the necessary adjustments rapidly as the market changes.

Get Good at Evaluating and Managing Risk

Leaders are taking on higher levels of risk, due to both the unpredictable business landscape and the need to seize opportunities early. Successful supply chain leaders understand that every business decision involves some level of risk. They are comfortable with risk and realize that risk management is about increasing the likelihood of achieving their objectives.

But they view risk through a broader lens with resiliency as a key goal. They deploy robust processes and competencies to detect, assess, quantify, and mitigate disruption. They make risk management a continuous and proactive exercise that is embedded in the culture. And they understand, and manage, the company’s appetite for risk – sometimes persuading the company to tolerate more risk to take advantage of opportunities and to support investments in resilience.

Driving Outside-In Thinking

Gone are the days when supply chain was a stand-alone, siloed function. Today’s leaders know the supply chain is a key component in determining which products and promises can be made to the market. Resilience 2.0 calls for an intense focus on where markets are heading so the company can “skate to where the puck will be.” Therefore, supply chain leaders must focus beyond “the four walls” and embrace outside-in thinking by asking questions like:

• Where is my industry, the market, and the global economy heading?
• How are customer expectations changing in terms of product mix, channel, delivery node, and speed?
• Do we have the right suppliers and partners? And do we fully understand the environments in which they operate and the impact of events on their ability to deliver?
• How do we push the company forward profitably and deliver the EBITDA required by shareholders?

Supply chain leaders also develop deep relationships with colleagues across organizational silos, then use outside-in thinking to align all stakeholders on a vision of the future and the collective and individual actions that must be taken when that future changes.

Embracing Digital Transformation, Cautiously

Digital transformation is key to Resilience 2.0 and the ability to respond quickly to disruptions. For example, automation helps reduce dependence on a limited labor pool and increase efficiency for faster fulfillment. Intelligent, predictive software helps companies anticipate and respond quickly to micro signals before they become macro changes. But leaders should approach digital transformation cautiously. They know technology has limits and that nothing is gained by a hastily implemented solution that is not a good long-term fit due to inability to scale, an unrealistic business case, or product obsolescence.

So, what do leaders do? They 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. They leverage technologies that are flexible and scalable and won’t need to be ripped out and replaced when the next disruption occurs. That might mean more narrowly-defined solutions – like adding robotics to a portion of an operation, or solutions that can be repurposed across multiple processes, like picking and replenishment. Leaders also understand that integration is key – new technologies must work synergistically within the current environment, while advancing their vision of the future.

Asking for Help

Today’s supply chain leaders understand their limits and reach out for help when warranted. They know that navigating Resilience 2.0 requires innovative thinking, new skills, and specialized knowledge. It requires understanding of both trends and technologies and what companies are doing to capitalize on them – across multiple industries, and around the globe. It takes knowing about new technologies and new suppliers. It takes understanding how each can be integrated into their existing environment, leveraged to solve business problems, and flex with future changes. And it takes being able to build a business case for investment that gains the support of all stakeholders. Sometimes, a third party can bring specialized skills and knowledge, help challenge entrenched thinking, and chart a path for the future.

The Changing Role of the Supply Chain Leader

The role of a supply chain leader has changed significantly in the last few years.  Today’s supply chain leader is a strategic, market-centric business leader who understands the complex linkages that make supply chain a key enabler of the business.  And they relentlessly drive Resilience 2.0 in their organizations.  Ask yourself:

• Have you embraced that disruption is the new normal and an opportunity for competitive advantage?
• Does your company value resiliency and adaptability? How’s your ability to “see around the corner”?  Are you able to pivot quickly when changes come?
• Are you an outside-in thinker with a finger on the pulse of the market and the global economy, and with a laser-like focus on driving customer value?
• Are you driving enterprise-wide alignment on the future state of the business and the key investments that are needed to get there?
• Do you take informed risks to optimize business performance?
• Are you making a series of “no regrets” technology choices to drive digital transformation?

FORTNA helps companies solve their complex distribution challenges. We are automation, software, and robotics experts, but our focus is on helping companies drive competitive advantage through their distribution operations, not technology for its own sake. We provide an unbiased view to best-fit technologies and innovative solutions to optimize your operations in a constantly changing landscape. We will help you build a business case for change that has the backing of all stakeholders and implement changes that drive the business forward. Contact us to learn more.

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¹ https://www.agcs.allianz.com/news-and-insights/reports/allianz-risk-barometer.html