Volatility Is Here To Stay, Here’s How To Deal

The quicker supply chain leaders recognize this new reality, the more likely they are to succeed in this environment.

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In 2022, supply chain leaders must recognize that volatility will be a fact of life for the foreseeable future. Trade tensions are unlikely to dissipate significantly, COVID-19 echoes may last for years, climate change may get worse before it gets better, social unrest across the globe has not abated and numerous military conflicts continue to play out. All these significant forces will continue to have an adverse impact on both the predictability of demand and the execution of end-to-end supply chains. The quicker supply chain leaders recognize this new reality, the more likely they are to succeed in this environment.

Given the reality of this volatile environment, there are four initiatives that supply chain leaders can focus their teams on in 2022 which can make both near term and lasting positive impacts:

1. Sourcing diversification:

Supply chain leaders can reduce their exposure to supply interruptions and better position themselves to meet unexpected changes in demand by developing redundant sources of supply. Even better if this redundancy is distributed across regions and countries to mitigate socio-political risks. Leaders should no longer rely on single source relationships with suppliers.

2. Supply chain visibility:

Supply chain leaders can significantly improve supply chain visibility by developing control tower capabilities. In the base application, control towers provide digital representations and exception-based alerts for key metrics across a defined scope of the supply chain network. This capability allows supply chain leaders to monitor key drivers that have an impact on changes in supply and demand and can be quickly designed and deployed with either packaged solutions or custom developed solutions using a minimum viable product (MVP) approach. By starting with a narrow scope and a limited number of use cases, with a clear expected business outcome, leaders can stand up a control tower capability in months. As leaders validate and refine their solutions, they can broaden the scope and scale these solutions. In addition, as leaders become more experienced with these solutions, they can shift to a more advanced usage of control tower capabilities by allowing them to be more predictive and prescriptive in identifying and prescribing pre-emptive actions to keep their supply chains running smoothly.

3. Continuous market sensing:

Supply chain leaders can shift from episodic and reactionary approaches to gathering market intelligence which may likely have an impact on their supply chain operations. Historically, leaders rely on occasional market research reports, trade news and word of mouth to stay abreast of world events and trends. The insights they gather are often based on structured, limited data sets and chiefly analyzed by humans with basic analytical tool sets. Today, market sensing can be conducted continuously – drawing on numerous sources of structured and unstructured data, leveraging machine learning to identify patterns and insight beyond the capabilities of human analysis. As a result, supply chain leaders can develop MVP data science solutions to detect trends, weak signals and key patterns that will have an impact on their supply chains. Such solutions can quickly and continuously detect changes in weather, political unrest, epidemics and more for supply chain leader to react and make smart changes. Like control tower solutions, these sensing solutions can be developed and deployed in weeks and months with narrow scopes and limited use cases.

4. Scenario Planning:

Supply chain leaders can develop a propriety point of view about the future for their company by developing three to four potential scenarios, which may range from optimistic to quite bleak. By exploring societal, technological, environmental, economic and political (STEEP) trends, as well as supply chain and industry sector trends, supply chain teams can construct unique future depictions of the world, the industry and their company. These teams can then identify the strategies and tactics they would employ which are common across all scenarios and implement them as “no regret moves.” More tactically, teams can use the scenarios to take a fresh look at existing products and service portfolios and rethink how they can remove underperforming vendors or processes, potentially redesigning or replacing those that are susceptible to supply disruptions.

Supply chain leaders must take a proactive approach to prepare for the unpredictability of 2022 and beyond. By investing in the above four initiatives, supply chain leaders can mitigate costly risk and remediation in the near-term but can also capture long-term business value. Afterall, many of the changes happening today will influence the way organizations operate in the years to come.