Supply chain disruption was a popular topic long before the world was seized by the coronavirus pandemic. Geopolitical disturbances, natural disasters, labor strikes, and changing regulations were already a factor, and anyone that has been in supply chain during the last decade has seen all of those play out.
At this point, the phrase ‘supply chain disruption’ seems as natural as ‘supply chain’ must have seemed the first-time people put the two words together. It would be easy to assume that all supply chains have been disrupted, especially given the breathless news coverage and the layman consumer’s perception that toilet paper and meat are impossible to purchase. While most supply chains have been affected by today’s fluid, unpredictable conditions, few have stopped altogether.
What do we mean when we say disruption?
Modern supply chains are high-performing, finely tuned machines. Lean or just-in-time practices have been commonplace for years, and the productivity and efficiency improvements have been impressive. The flip side of that coin, however, is that a global supply chain’s tolerance for static and friction is very low.
The word ‘chain’ evokes images of metal links locked together, but this analogy has not been apt for a long time. Terms such as network, ecosystem, and web are far more appropriate. While it takes a pair of bolt cutters to get through a steel chain, a stiff breeze can destroy a spider web in an instant.
As a result of supply chain fragility, even the loss of transparency can have a disruptive effect. Not sure when a delivery will arrive? Disruption! Uncertain how much stock is on hand at the warehouse? Disruption! Finding it difficult to project demand without typical seasonal and consumer patterns? Disruption!
Supply chain managers are working on a continuum that extends from steel to spider web. On the one end is a set of nearly unbreakable links, and on the other is a silky thread. Steel is expensive and lacks agility, and while thread is able to flex, it can be destroyed in an instant. As we start to recover from the COVID-19 pandemic and resulting business restrictions, the challenge will be finding the sweet spot between silk and steel.
This process of discernment starts with the truth of our current status. While some supply chains have faced serious issues, and high-visibility bankruptcies are starting to hit the news, the level of disruption may have been over-hyped. For instance, according to a recent survey run by Packaging World, 53% of CPG supply chains have NOT been disrupted thus far. The issues that have occurred resulted from increased lead times and difficulty sourcing ingredients.
If we over-blow the disruption threat, we will optimize for a spot on the continuum that is too close to steel, resulting in costly and staid product offerings. But we can’t go back to business as usual either, ignoring the risk associated with international dependence, poor data visibility, and low inventory resiliency.
Each supply chain management team will need to make highly contextualized decisions of its own, rooted in fact and experience. Professionals in the automotive or consumer electronics supply chains should not make decisions on generalized information or the results of the CPG industry research referenced above – although they can find inspiration and potential solutions everywhere.
To increase the level of precision with which your company finds its target on the silk-to-steel continuum:
- Define disruption carefully and be as specific as possible when communicating internally and with suppliers. What exactly do you mean when you say disruption: delay, switching sources of supply, increased input costs, operational interruption?
- Calculate and track the costs (in both time and cash outlays) associated with each specific disruption the company experiences. Use those values to calibrate the scale of your response.
- Make an effort to track non-disruptions as well as the far more invasive disruptions. Which suppliers, supply chains, and sources remain intact or outperform expectations?
Any company can go all steel or full silk, but neither choice will lead to sustainable success. Only a precise understanding of relevant disruptions, appetite for risk, and supply chain capabilities will allow leadership teams to recalibrate and rebuild in the shadow of the pandemic.
Header photo: alphaspirit – Getty Images