Embracing Uncertainty
Creating a flexible supply chain strategy for a fluid future
The world has been in a constant state of uncertainty for decades, with only brief interludes of relative stability. The only thing organisations can do in such a perpetual state of flux is to be flexible in their strategy, and execution. The large goals would of course continue to be steady, but the roadmap would have to change depending on the situation. At times these changes are quite dramatic.
Intensifying volatility
Traditionally, most organisations have set ‘reducing uncertainty’ as the objective of their planning. But it is becoming more apparent to many leaders that in a world with increased demand volatility and more frequent big-impact supply chain disruptions, you cannot really expect to eliminate – or even reduce – uncertainty. And, this volatility won’t change in the future, it might rather become even more intense.
According to Gartner’s Future of Supply Chain Survey 2021, 74% of supply chain leaders say their customers will expect the ability to customise/personalise products to their own unique requirements in near real-time and 51% say customers will expect last-minute delivery changes to their geolocation. That was last year. In 2022, only a few could predict the Ukraine war, and the resurgence of COVID-19 in Shanghai. Both events knocked out the supply chains of several products and commodities, from wheat to semiconductors.
Create supply chain models
While some organisations have resorted to knee-jerk reactions ranging from in-shoring, and near-shoring, to figuring our new suppliers, organisations that truly recognise the need to manage uncertainty are investing in supply modelling capabilities. The majority of supply chain networks are complex and require a significant number of resources that must come together at the right time to deliver customer requirements.
One cannot expect to successfully manage a complex network and account for the machine, labour, raw materials, space, transportation, and other constraints in spreadsheets. Increased modelling capabilities include mapping a wider range of resources and constraints, identifying risks, and ultimately allowing you to build plans based on ranges, rather than single-point forecasts. To support visibility and identification of constraints, risks and opportunities across the entire value chain, mature organisations are also increasing collaboration with suppliers.
Apple readied India for iPhone delivery
Apple had been one of those rare companies which had used business intelligence to start developing a manufacturing base in India to make some of the advanced iPhone models, which were being manufactured in China. They had started the process way back in 2020 when the pandemic had let to plants being shuttered down in China. The process included preparing the Indian workforce, laying out the manufacturing facilities, and lining up new suppliers. Collaboration with suppliers was a key element of this strategy.
Challenge assumptions
A Gartner blog says that every plan you build is based on a list of assumptions – typically a long one. You must be willing to challenge those assumptions to understand the alternatives of what the future can look like. The team must constantly ask questions like: What if we are wrong about this assumption? What would that mean?’” By consistently asking these questions one can get closer to ensuring that one of the scenarios you are examining resembles the actual future.
Keep a constant vigil for disruptions
Once a decision has been made or agreed on a plan, it is important to identify the circumstances under which that plan remains valid. Most supply chains build buffers into their plans. Safety stock inventory is one of the most obvious ones. However, as soon as demand changes, they react and update supply plans – ignoring the fact that they could have simply used safety stocks to react and maintain stability in their short-term supply plans. Clearly identifying the thresholds within which the current plan remains the best plan can help maintain stability in an unstable situation.
When the future is flexible to this extent, it is realistic to stop expecting the planning processes to be about reducing uncertainty and refocus the attention on supporting the best possible decisions with the information available at the time the decisions need to be made. Information gathering must become a 24X7 task assigned to a special team to track every global and local event, analyse the impact those will have on supply chains, and keep feeding the decision-makers to factor the changes into the strategy.
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