Supply Chain Resilience: Managing Uncertainties And Disruptions
Business disruptions due to crises are not uncommon, and there have been exemplary instances of organisations surviving such disruptive periods in the last century. These companies have managed to remain operational despite financial crises and everchanging customer behaviours across economies. As the global economy faces an unprecedented crisis at present, it would be interesting to see how organisations navigate the multiple disruptions to their supply chains. The present crisis poses multiple challenges for organisations as they would be required to tackle disruption across their demand profiles, supplier availability, and logistics and production.
Disruption: The new normal
Natural events, economic uncertainties, pandemics, etc., have resulted in businesses facing disruptions worldwide. Businesses are operating amidst global trade wars and rising protectionism, and have accepted these disruptive conditions as the new normal for their operations. Hence, at a time when businesses are facing possible contraction, they need to be more tactical and manage operations with more preparation, agility and accurate data. From a broader perspective, these disruptions may have an impact across the overall supply networks and can expose the existing fragility in supply chains of even the most sophisticated organisations. The present crisis has resulted in multiple simultaneous disruptions across entire supply chains. For example, demand for particular products have increased/decreased beyond control, manufacturing facilities are shut or working at reduced throughput, logistics have been impacted and suppliers have closed operations.
“The importance of having resilient supply chains is being identified across boardrooms and becoming a business differentiator”
The importance of having resilient supply chains is being identified across boardrooms and becoming a business differentiator. Firms will be at an advantageous position when supply chains adapt quickly to the changing realities of the market. This was difficult earlier due to the sheer complexities and opacities in ever-expanding supply chains, but such adaptation has become possible today with the advancement in technologies providing visibility and awareness across the value chain. Technology and data analytics capabilities have made it possible to transform a traditional supply chain that is situated across a vast network into a connected supply chain. It is linked across through data generation at each node, enabled by intelligent analytics, streamlined though end-to-end collaboration and facilitated by state-of-the-art technology platforms.
Data as an enabler for a resilient supply chain
Supply chains need to be made proactive to identify issues and problems before they actually emerge by leveraging both internal company data and external data. For example, supplier availability and risks associated with the supply chain could be detected across a multitier supplier network by analysing various news articles, macroeconomic data, social media posts and other related and reliable data sources. The data-driven systems could provide triggers to flag vulnerability if a set of keywords is observed above a defined threshold. For example, detection of keywords such as movement of cyclonic winds or labour unrest in a particular region would enable organisations who rely on suppliers in that region to be cautious and prepare for sudden requirements of re-routing if production or logistics are disrupted at the supplier’s end.
The need for such an early warning framework becomes more urgent when we realise that due to the uniqueness of most disruptive events, historical data does not paint an adequate picture of future behaviour and trends, and consequently, the present industry-wide predictive techniques fall short of preparing us for such risks. In an uncertain situation where organisations are unaware of the impact of disruptions, it becomes important to utilise the potential of what-if analyses and find the optimal course of action to mitigate the impact.
To enable data-driven decision making, a digital prototype of the existing supply chain can be created using modelling and simulation techniques, and analytic capabilities can then be leveraged. For example, modelling and simulation can help organisations to quickly assess the service-level impact of longer logistics lead times and lower production throughput due to social distancing norms at manufacturing facilities. Multiple scenarios can then be evaluated to identify a set of parameters that can help to achieve the desired service levels. Similarly, simulation also makes it relatively easier to understand how an upstream shock will propagate through the entire supply chain. A parameter-driven approach can be used to simulate a multitude of scenarios across multiple disruption dimensions for assessing and quantifying the value at risk for the enterprise. Modelling and simulation can also assist organisations in moving beyond an enterprise-level view and gaining an ecosystem perspective for more reliable decision making.
To counter various disruptive events, an end-to-end solution that addresses the vulnerabilities of the supply chain is required. Modelling and simulation provide a way to accurately model the network complexities and interactions between the various components of a supply chain, along with their associated stochasticity, time and causal dependencies, as they exist in the real world. This enables organisations to gain visibility into the dynamic behaviour of their supply chains and allow riskfree experimentation to analyse multiple possibilities in a cost-effective manner. An accurate impact assessment can help organisations to formulate robust risk mitigation strategies for the future. This will ensure that the supply chain is efficient, agile and resilient enough to handle risks and maintain business sustainability even in times of crises.