During the pandemic, numerous disruptions to supply chains developed, leading to reactive management. Many of these disruptions continue post-pandemic, making it clear that developing a strategy to create a resilient and agile supply chain is imperative.-By Cecil Parang

It may be the post-pandemic period, but many supply chain disruptions during the pandemic are still occurring. There are shipping delays, goods and materials shortages, manufacturing delays, port issues, extreme weather events and technology disruptions. Then add to those, cost increases due to inflationary pressures, multi-channel supply chains adding complexity to logistics, geopolitical conflicts. And let us not forget cyberthreats, changes to retail and distribution supply chains, shortage of truck drivers and shipping containers, and changes to consumer expectations that embrace environmental and social factors in sourcing and production. It was hoped that many of these disruptions attributed to the pandemic would end post-pandemic, but it is already clear that is unrealistic. Going forward, supply chain managers recognize they must develop dynamic supply chains that are agile, responsive and always ready to anticipate and address risks and opportunities. Achieving these goals requires deep visibility into the supply chain, modeling, risk management, technology upgrades, and developing a flexible supply chain with alternative suppliers, to name a few strategies. The challenge is approaching the supply chain holistically, to institute necessary changes while keeping it working smoothly.

Future Expectations for Supply Chains Have Changed

Many businesses are giving serious thought to the future of their supply chains. The disruptions caused by COVID-19 have highlighted the need for greater flexibility and resilience in supply chain design. Some companies are taking steps such as moving production or distribution locations closer to their customers, to reduce transportation costs and improve delivery times. Others might be exploring alternative input sources to reduce dependence on a single supplier. Overall, businesses are taking a more strategic approach to their supply chains with resilience and agility in mind, and they are looking for ways to mitigate risk and improve efficiency.

Gartner names three qualities of a resilient supply chain: visibility, agility, and resilience. These qualities should be built into any changes to the supply chain to ensure efficiency, competitiveness, and the ability to manage disruptions effectively. Gartner offers supply chain disruption insights. First, 30% of chief supply chain officers are moving away from a global supply chain model to a regionally based one, bringing manufacturing and supply bases home. To address inflation, four strategies are recommended. One is to use incentives to direct demand for available products. Two is to shape portfolios around alternative materials. Three is to secure lower tiers to ensure a continuous supply. Four is to collaborate with suppliers to optimize the allocation of constrained resources. To solve the logistics capacity shortage due to a driver shortage, supply chain managers can strive to retain older workers and develop a strategy to attract younger ones.

Supply chain officers must have four leadership priorities to develop an effective supply chain response to high inflation and a potential recession. One priority is to exhibit steady leadership, including developing plans for improving efficiency and sending reassuring messages internally and externally that plans are developed to ensure product availability and service delivery. The second leadership priority is coaching and developing the supply chain team on planning and proactively responding to possible scenarios. The third leadership priority is to manage overhead cost reductions by having superior control and management over COGS, and the fourth priority is to protect investment spending, including technology for advanced pricing analytics, operations and back-office automation, and strategic sourcing processes. The fourth primary concern Gartner addresses is the global energy shortage and the increasing cost of supply chain sustainability. Supply chain leaders must address supply chain risk with analytics, planning, and investments to reduce greenhouse gas emissions.

Deep Visibility into the Supply Chain a Necessity

Two clear takeaways are that supply chain managers face complex challenges over the next five years. Still, disruptions should be approached as opportunities to adopt innovation and forward-looking strategies. Companies are rethinking their supply chains and restructuring them to better fit the business environment that will remain disruptive. Eastern Carolina University says Under Armour is using pandemic lessons to “accelerate inventory, pricing, delivery, and production initiatives to improve its efficiency and effectiveness.” Companies are also employing disruptive technologies like blockchain, 5G, IoT, artificial intelligence, and machine learning to improve efficiencies and increase visibility and transparency. Academics discuss a “global scanner strategy” which maps global supply chains with end-to-end information for deep and broad visibility. Another strategy was implemented by Freightliner in which resource and technological support is given to suppliers to reduce barriers to supply relationships and improve efficiencies, production, and logistics.

Developing a deep understanding of the supply chain is absolutely necessary before taking steps to revamp the supply chain to be prepared for, manage, and minimize disruptions. Ernst & Young (EY) surveyed 200 senior-level supply chain executives, focusing topics on the pandemic impact on supply chains, the priorities for the next 1-3 years, and the path to developing digital or autonomous supply chains. One of the positive impacts of the pandemic disruption is that supply chain managers got a voice in their organizations and increased investments in technical capabilities. However, in preparing to better manage in the future, the top priorities were increasing visibility and efficiency and reskilling supply chain workers. To gain increased visibility, there is a shift from linear supply chains to integrated supplier networks enabled by technologies.

The EY survey also found that 80% of supply chain leaders are more focused on ESG and sustainability. The future of supply chains is digital transformation but at a higher level. Supply chains need, says EY, “connected supply chain technologies across planning, procurement, manufacturing and logistics that work beyond the organization’s four walls.” The strategic approach requires investing in a revised supply chain strategy and reimagining the supply chain operating model. Real-time visibility and monitoring of the supply chain, simulations, and scenario planning are needed. Develop deep supply chain transparency; step change the cost structure and working capital; redesign products to strive for more sustainability and a circular economy.

Rising Above the Chaos

Making the supply chain changes needed to prepare for frequent disruptions, plus adapting to new technologies and geopolitical drivers, requires strategic planning. Disruptions can be turned into opportunities. One of the opportunities is increased reliance on supply chain diversity as innovative, diverse suppliers get more visibility at lower tiers. Arguably, the business environment has never been more complex and challenging than it is now. For supply chain management leaders, it is also the ideal time to reinvent the supply chain to build greater resilience as senior leaders recognize the critical role supply chain management plays in keeping the organization competitive amid the continuing chaos.