Many companies learned the hard way during the Covid pandemic that their supply chains were not nearly as resilient as they thought. These companies were not able to adapt and recover from the pandemic-induced disruptions quickly and effectively enough to avoid financial or customer service harm. That’s why over the past few years, enabling supply chain resilience has become a priority for many companies, especially those with global operations. What actions are companies taking to make their supply chains more resilient? What does “operational resilience” mean, and what does it look like in action? Those are some of the questions I discussed with Gordon Fischer, GVP, Product Management at e2open on a recent episode of Talking Logistics.
What are Companies Doing?
We started our discussion with Gordon explaining the three main types of actions companies are doing to improve the resilience of their supply chains. He notes these aren’t just in response to the pandemic, but also due to trade wars, geopolitical conflicts, climate change and more. He says the first thing companies are doing is strengthening their networks and connectivity to suppliers and trading partners across their extended supply chains, including n-tier suppliers.
Once you have that connectivity, the next step is getting visibility and alerting across the network. For example, when is a shipment from a supplier in Asia going to hit port and what if there are unexpected delays?
The third step is using that visibility and alerting to isolate the causes and adapt dynamically to the disruption. This involves getting the involved parties together digitally to resolve any issues rapidly and effectively.
Operational Resilience
Resilience is not a monolithic practice. It involves multiple levels that together define corporate resilience. The first level is strategic resilience. This is where companies design long-term resilient networks into the supply chains. An example is having multiple suppliers for the same components in different locations such as in China, South Asia, and Mexico.
The second level is tactical resilience which might involve scenario planning, inventory positioning, buffer stocks, etc. It is proactive planning.
The third level is operational resilience. This is the ability for essential business operations to continue to operate through disruptions with minimal impact to the business. This involves the ability to detect the disruption, understand the impact and then act to resolve the problem.
Putting the three levels together to resolve a disruption, for example, may mean pulling from safety stock or switching to another existing supply source.
Gordan explains that operational resilience may involve simple inventory issues as mentioned above or may involve planning for components needed for manufacturing which impact production, or may involve synchronizing the delivery of key parts or kits needed for specific builds such as a cell tower or windmill. All three scenarios are important for operational resilience, but Gordon mentions that beyond responding, it should also entail learning from the disruptions in order to plan for better future resolutions. This may involve the use of AI and machine learning.
Benefits of Operational Resilience
Creating operational resilience requires investment. So, how do you convince the C-suite to invest, what are the benefits?
Gordon says, “No. 1, by investing in operational resilience you will minimize the financial impact of any disruptions. No. 2, you’re going to increase your agility and time-to-market. No. 3, you increase long-term efficiency and preparedness through learning.”
For example, Gordon notes that gaining end-to-end visibility may save you the cost of expediting shipments because you know with confidence that products or components will arrive on time. He also mentions being able to create a competitive advantage by delivering products to customers more reliably and consistently than competitors can. This improves customer loyalty and increases long-term revenue and market share. And third, by increasing long-term efficiency and preparedness through learning, companies are able to make better strategic decisions on sourcing, product introductions, and network design.
Gordon summarizes the benefits as being able to reduce the costs of disruptions, avoid longer term costs through improved efficiency, and positioning the company for growth. “It’s not a one-time project, it’s a continuous process,” he says.
Capabilities Required
What capabilities are required for companies to become operationally resilient? What steps should they take to begin this process? How do they define the ROI? Gordon offers great insights and advice on those questions and more, so I recommend you watch the full episode for all the details. Then keep the conversation going with your own questions and comments.
