Numerous geopolitical factors, from conflict in Ukraine to the pandemic-related lockdown in China, have placed unprecedented pressure on the globalized trade system. The result is shortages in goods, labor and storage capacity.
According to Gartner, as of 2021, 68% of supply chain executives were constantly responding to high-impact disruptions over previous last three years. In other words, there was no time to recover from one incident to the next.
Will things get better anytime soon? We’re far enough into 2022 to know that this year won’t see a return to normal. But it could be a turning point.
What’s changing is that businesses are investing in adding capacity and adopting new technology to drive efficiency and reduce costs in supply chain planning. At the same time, they’re taking a new attitude toward disruption. They’re seeing it as an opportunity to improve operations and achieve competitive advantage.
The need to mitigate the impact of major disruptions has also highlighted the cumulative effect of relatively minor events on business efficiency. While not on the scale of a Suez Canal blockage or extreme weather, these smaller disruptions regularly crop up to spoil an otherwise perfect day. Supply chain managers draw on well-rehearsed tactics to smooth out the bumps, but at what cost?
The adoption of tactical “firefighting” rather than a strategic approach should sound alarm bells, not least because of the missed opportunity to revolutionize supply chain planning. True operational excellence means a resilient supply chain that outperforms its peers, gets better year over year and delivers value.
Four pain points illustrate the plight of many supply chains today:
Four pain points call for four remedies. Here’s how future winners are getting creative with supply chain planning.
Regardless of the business leader driving the change, the evolution of supply chain planning calls for a collaborative approach across the organization, and an integrated approach between finance and operations. As Simon Bailey, senior director analyst at Gartner says: “In 2022 and beyond, chief supply chain officers must update their vision to account for ongoing and unimagined disruption to global networks, operating models and stakeholder demands.”
Truly integrated planning will send positive ripples throughout the organization, and tear companies away from traditional thinking. That’s the first step toward supply chain excellence — and better performance in key performance indicators, margins and profitability.
James Paterson is vice president and general manager, CCH Tagetik North America, at Wolters Kluwer.
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