Business leaders should enable both their own organization and supply chain partners to survive and thrive in challenging times.
Today’s business press sends many conflicting messages about the economy and other topics. There are constant headlines about geopolitics, climate change, social issues and many other subjects with differing premises and conclusions. Society has become more polarized, creating even stronger opinions and more confusion. As a result, there is no doubt that we are operating in an era of great complexity and uncertainty.
Three powerful ingredients are combining to create a cocktail of complexity and uncertainty. Firstly, geopolitical tensions are arising from growing competition between countries, which are exacerbated by nationalism and populism. Some obvious examples of geopolitical tensions include the US-China trade and currency dispute, Brexit and the recent attack on Saudi Arabia’s oil facilities.
The second ingredient is societal change. Today, the first digitally native generation — Generation Z — is entering the workforce. At the same time, wealth inequality is causing protests and unrest, while societal expectations of companies are changing. It is no longer seen as acceptable that companies exist purely to create shareholder value; they must have a purpose and positive social impact as well.
Finally, we see digital disruption and accelerated technological change. These are resulting in new technologies, new products, new business models and new market entrants that can scale their operations at a faster rate than their predecessors ever achieved in the past.
So, what does this period of complexity and uncertainty mean for business leaders? Fundamentally, it means that they need to prepare their companies to withstand volatile market conditions. As part of this preparation, they will naturally need to review how they manage every aspect of their supply chain, from the sourcing of raw materials and component parts through to the manufacturing process itself and the distribution of finished goods.
Leaders should begin a review of their organization’s supply chain by asking themselves some fundamental questions. For example, can the business respond quickly to fluctuations in demand? Does it have the capabilities to drive down the cash conversion cycle? Is it reliant on a mostly fixed, full-time workforce? Does it have visibility of sub-tier suppliers that might cause supply disruption?
Once they understand the current readiness of the business to withstand volatility, leaders will then be able to apply tools and techniques to enable both their own organization and their supply chain partners to survive and thrive in challenging times. Any business that is serious about surviving and thriving in turbulent times needs to both play-it-safe and double-down. What’s more, historical data shows that organizations that follow both approaches benefit from upsized returns in the next business cycle.
What do I mean by play-it-safe and double-down? Playing it safe is about protecting and optimizing your business. Typically, in supply chain it involves improving overall equipment efficiency and manufacturing performance, driving utilization for transportation networks, taking advantage of strategic sourcing to consolidate volumes and rationalize supply bases, and reducing cash-to-cash cycle times with a focus on accounts payable, accounts receivable and inventory.