In my previous blog(https:\/\/blogs.infosys.com\/infosys-cobalt\/cloud-applications\/supply-chain-volatility-the-problem-of-today-and-tomorrow.html) , I talked about the supply chain challenges that are encompassing today and also will impact tomorrow. It also defines some of the opportunities for improvement which the organizations can look at overcoming those risks. Extending more to that, I would say that organizations need to have a resilient supply chain to overcome and address those concerns and the more proactive we are, the risk for impact and recovery or even avoidance is much more. So, the first question that comes to our mind is what are these risks or threats that can cause disruption. Some of the examples are as below:<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Lack of Production & warehouse capacity<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Issues in logistics due to delays, global economic scenarios changes, theft or damage<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Market challenges in raw material shortage or price fluctuations<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Supplier relationship issues and lack of backup opportunities in case of high usage or high critical items<\/p>\n
e.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Natural disasters impacting production or logistics i.e. Covid19<\/p>\n
So, the organizations need to be extra careful to predict and analyze the threats and challenges for their industry and take necessary steps. This is what we call as resilience which is the time taken for predicting and analyzing risks and as well respond and recover from these disruptions. There are 2 critical components which are needed \u2013 the resistance capacity (Reduce impact of disruption) and recovery capacity (Resume normalcy after disruption). The key steps in this process:<\/p>\n
A.\u00a0\u00a0\u00a0\u00a0\u00a0 Identify Risks \u2013 both Internal & External<\/p>\n
B.\u00a0\u00a0\u00a0\u00a0\u00a0 Analyze Risks \u2013 Evaluate & Determine impact<\/p>\n
C.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Respond to Risk \u2013 Steps to protect & manage supply chain impacts<\/p>\n
In a way, it the supply chain\u2019s capacity to reduce the impact of threats by either reducing or evading the time of impact. It helps to predict and lessen the impact of disruption. It also includes the recovery time needed by the supply chain to return to normal operations.<\/p>\n
Considering the recent natural disaster Covid19, there was a major disruption in the supply chain area which has impacted the various industries in various forms. The close-down of factories in certain highly impacted countries created shortage of raw materials and inputs for various other industries thus impacting other downstream industries. Also, movement of materials across industries due to lockdowns impacted the overall supply chain. In many cases, materials got wasted or lost in intransit due to the logistics disruptions. Loss of lives in the pandemic also created a major shortage of trained labor force. So, the impact of this was huge and there were many organizations which shutdown and some which took substantial time and some which were quick enough to recover. The organizations which were more resilient were able to recover much faster and reduce impact. Similar situations also arose from Hongkong riots, Russia-Ukraine war or the Trade Compliance related risks with China imports.<\/p>\n
Now the question is what takes for an organization to be more resilient? Are there other factors that contribute to the level of resiliency that an organization is in? Is it the like the insurance cover that the individual has, and how is the chance of a high-risk disease and the surrounding expenses. It is a tradeoff between supply chain risk and business efficiency and increased cost. It is not simple and needs a holistic view and commitment from the entire organization. The five pillars that needs focus in this process:<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Vulnerability: Risk exposure & assessment of an organization<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Management Culture: Identification of risk at the executive level<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Procurement: Supplier collaboration & backups<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Operations: Production & Inventory carrying strategies<\/p>\n
e.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Demand & Visibility: Future order predictions and strategies to fill.<\/p>\n
To achieve these pillars, we first need to have a framework for risk assessment for the supply chain which would:<\/p>\n
i.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Constant monitoring & assessment of vulnerabilities<\/p>\n
ii.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Real time visibility of supply chain & manufacturing network<\/p>\n
iii.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Built-in redundancy & agility in sourcing & procurement contracts<\/p>\n
iv.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Improve predictability using AI\/ML<\/p>\n
v.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Workforce planning & management for worst case scenarios<\/p>\n
<\/p>\n
Having identified the pillars for resilience and the framework for risk assessment, we would then need to look at the various supply chain capabilities that needs focus:<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Anticipation: Futuristic situation recognition using forecasting techniques, monitoring and risk identification<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Adaptability: Ability to respond to challenges or opportunities with technology developments, learning experiences and strategic simulation<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Efficiency: Ability to achieve results with minimal resource requirements using labor productivity, asset maintenance and process standardization<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Visibility: View of assets in terms of inventory, equipment, personnel, customers, and suppliers<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Capacity: Ability to map up to different production levels<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Financial Strength: Impact Cash flows and liquidity with diversification and additional costs of insurance<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Market Position: Manage brand statuses\/share with differentiators and customer loyalty\/retention<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Organization: Skill and culture mapping for employees with learning, caring and flexibility<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Security: Defense against attacks \u2013 both physical and on the web. Cyber-security & Physical security<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Collaboration: Ability to work effectively with other sub-groups and departments in decision making, communication and risk management<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Dispersion: Decentralization with distributed suppliers, production, distribution, and decision making<\/p>\n
\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Recovery: Ability to return to normal operations with mobilization, communication, & crisis management<\/p>\n
So, the three core enablers are processes, people and technology. Thus, there is a major overhauling that is needed in these organizations to make it resilient. Organizations need to strategize properly to achieve it: Some of the strategic moves that help create resilience are:<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Inventory buffers: Companies try to create buffers for highly complex or shortage items thus reducing the risk of shortage or manufacturing wait times. On the reverse, the inventory carrying cost increases and may result in stockpiling in certain cases<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Multi-sourcing: Organizations need to follow a multi-sourcing approach for all their material from suppliers and contract manufacturers to cater to spikes in demand, unavailability, or regulatory control on suppliers.<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Near-shoring: Organizations try to reduce geographical dependence and shorten cycle time by bringing raw material supply near to their manufacturing facilities.<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Ecosystem partnerships: Companies collaborate with strategic raw material suppliers and external service partners to diversify production and operations.<\/p>\n
The other advancements that the world has gone into for organizations to go for digital transformation and modern supply chain technologies also help business develop their resilience. Area of work in artificial intelligence, machine learning, robotics, IOT and additive printing has helped the cause.<\/p>\n
We talked about the pillars, framework, capabilities and strategies for resilience and how companies can become resilient. But how do we measure resilience? There are three core metrics that are used:<\/p>\n
i.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Time-to-survive: Amount of time needed for resumption of operations after a disruption<\/p>\n
ii.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Time-to-recover: Time taken to recover all backlog<\/p>\n
iii.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Time-to-thrive: Evaluation of a company after recovery from a disruption<\/p>\n
Now the question that comes up, is your organization resilient? Have you evaluated it based on the metrics as defined above? Do we know what we need to do for that? I would say, it is not possible for an organization to be 100% resilient but there must be a balance based on all the capabilities and pillars which would define the level of resiliency.<\/p>\n
Please share your feedback \/ questions in the comments section or via email.<\/p>\n
<\/p>\n
\u201cResilience is accepting your new reality, even if it\u2019s less good than the one you had before. You can fight it, you can do nothing but scream about what you\u2019ve lost, or you can accept that and try to put together something that\u2019s good.\u201d<\/p>\n
\u2015 Elizabeth Edwards<\/p>\n","protected":false},"excerpt":{"rendered":"
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