To survive and thrive, organizations must balance efficiency with adaptability, flexibility and effectiveness.
Supply Chain Future- COVID-19 and the resulting economic downturn have challenged organizations to re-evaluate their ideas about how to optimize the supply chain. Rather than focusing solely on cost and market share, organizations must now consider how to address risk and meet strategic goals while achieving efficiency. This responsibility falls primarily on supply chain planners, who must consider the need to keep logistics modes flexible, quickly react to unforeseen high-impact events and pivot to address shifts in demand.
Being able to balance these needs is essential to building the supply chain of the future. Organizations leading the way in supply chain planning exhibit key behaviors that drive their superior performance and make them well suited for both weathering the current uncertainty and emerging from it positioned for success.
These organizations keep themselves flexible to react quickly to unanticipated interruptions, yet they also plan for the future by ensuring that they can support both existing and future business models. They are also increasing their analytical maturity so that they can use data in both a predictive and prescriptive manner. Additionally, they track trends in emerging technology to keep supporting business strategies and goals. As organizations position themselves to develop the supply chain of the future, they would do well to adopt the practices of other organizations leading the way.
Balance efficiency with risk
APQC’s research indicates that leading organizations exhibit adaptability by reconsidering how they decide on supply chain strategies. Traditional supply chain wisdom states that organizations should focus on efficiency to control costs. However, to achieve stability and guard against unanticipated events, organizations must balance the need to control costs with the need to mitigate risk.
The disruption caused by the pandemic has revealed the vulnerabilities of organizations that made their supply chains as lean as possible, particularly from an inventory perspective. Planning with risk in mind enables organizations to quickly adapt to unanticipated shifts in demand and position themselves to thrive once things stabilize.
APQC recommends that supply chain planning decisions aimed at efficiency also consider the full range of possible risks to the business. This includes high-probability, low-impact events as well as low-probability, disastrous events. As part of this, organizations should build scenarios and compile risk profiles of key business partners to provide a complete picture of the impact of an event.