The post-pandemic “new normal” is a world of constant volatility. Even the most proactive supply chain or procurement leader can’t predict every variable that can affect the supply chain, including inflation, component shortages, the global health landscape, trade risks and geopolitical or natural events. The one thing that’s clear is that volatility is here to stay, and supply chains need long-term solutions to navigate change.
No vertical is immune from these continuous waves of disruptions. The pressure is on to maintain profit margins while simultaneously focusing on sustainability and the need for ensuring a positive social and environmental impact.
Procurement and supply chain leaders must be prepared for this new normal. According to the 2022 Gartner Board of Directors Survey, 57% of boards of directors have increased or expect to increase their risk appetite heading into 2022, citing economic uncertainty (38%), disruptive business models from competitors (35%), and cost inflation due to supply shortages (28%) as the top risks to business performance.
The good news is that leaders who draw on available insights and intelligence uncover unique opportunities, level the playing field with competitors, and create a sustainable long-term advantage.
Following are three key factors that the smartest supply chains in the world are implementing to successfully navigate disruption:
Embracing volatility as the new normal. Accepting that reality is step number one; embracing what’s required of leaders moving forward is step two.
Companies must act now or be left behind. As Bain & Company said in a recent brief, the supply chain reset is happening now: “A growing number of executives have decided they can no longer afford to get caught flat-footed. They recognize that while it’s important to respond effectively to short-term supply chain shocks, they also have to reposition their supply chain for the long haul because disruption is the new global reality. Companies that manage these disruptions best will have a distinct competitive edge over the next decade.”
Companies that are embracing the change now are able to build for the future. Ford Motor Company isn’t waiting for stability, and hasn’t scaled back its ambitious plans to simultaneously invest in digital transformation and keep its commitments to sustainability. By splitting into business units dedicated to either combustion engines or electric vehicles, Ford expects to increase EV production from 1% to more than 30% in just four years.
Accelerating the pace of innovation. The world’s smartest supply chains run fast product development cycles, allowing them to respond continually to shifting customer preferences. Data transparency and decision intelligence allow supply chain teams to seamlessly collaborate with product teams and suppliers, setting high standards for performance while strengthening third-party relationships.
Take wearable device manufacturer Fitbit. The company has demonstrated it’s possible to increase cost savings and efficiency without jeopardizing supply continuity. By enhancing its visibility into supply chain capabilities, it has reduced its analysis time by 75%, has 90% of its strategic spend under management, and has delivered 2%-3% incremental cost savings.
Fully utilizing insights for action. Companies must rethink what they require from people, processes and technology. Whether that means making an investment in digital platforms or placing an emphasis on hiring digital natives, these steps are necessary to position for future success. Next-level leaders must take the added step of applying an “outside-in” perspective, considering all internal capabilities through the lens of the customer.
For leaders to prove they’re relevant and well-equipped, they must have the tools to navigate uncertainty and generate new sources of value for customers. As Gartner states in a recent report entitled “Shockproof Your Supply Chain for the New Age of Disruption.” “By 2030, 80% of companies will have digital and physical business synthesized and executed in supply ecosystems that are competing in a multi polarized, constantly disrupted world in which resilience and risk management will be the key competitive advantages and differentiators for success.”
What we’ve witnessed of leadership, innovation and resilience over the last couple of years is evidence of institutionalized speed. The technology exists today for leaders to move from insights to action, fully utilizing available data and intelligence to make the critical decisions when they need to, open the door to new product and service offerings and customer-centric innovation, and ultimately gain the same competitive edge that the smartest supply chains in the world already have.
Angel Mendez is executive chairman at LevaData.
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