Supply Chains - Building resilience to move full speed ahead.

A resilient supply chain is critical to customer innovation, and a company’s ability to respond more quickly and proactively to changing market dynamics.

Executive summary:

• Four ways to build resilience into operations.
• Impact of advances in technology on risk monitoring.
• Reflection on omni-capability.

In the past two years, we’ve been talking a lot about the need for organisations to become more resilient across their businesses. But in truth, the need for resilience was building long before the COVID-19 pandemic reared its ugly head. Faced with growing convergence, disruption and an ever-accelerating pace of change, businesses have been forced to transform – that is, change the way they operate – to meet new market demands.

At EY, we’ve seen how robust resilience programs play a critical role in an organisation’s ability to adapt and survive. But maintaining resilient and networked supply chain and manufacturing processes is not just about mitigating risks. It’s critical to customer innovation, and a company’s ability to respond more quickly and proactively to changing dynamics.

We see four ways to build resilience into your operations so that you can move full steam ahead into the future. 

1.  Improve operational visibility and risk monitoring

While the pace and scale of today’s global supply chain disruption is unprecedented, there are real solutions to improve visibility, simulation and risk monitoring. Advances in technology - such as internet of things (IoT) sensors, artificial intelligence (AI) and software such as control towers – have put the elusive goal of end-to-end visibility, and the means to act on it, well within reach.

Driving end-to-end visibility includes identifying the critical parts and Tier N suppliers (the suppliers of your suppliers and beyond). It’s just about impossible to get full visibility down to the Tier N level for all suppliers, so you start by setting priorities based on risk.

It also means developing relationships centered around trust. Organisations must work with their key suppliers and ecosystem partners to build platforms that encourage collaboration and transparency, gaining the ability to collectively adjust plans and make better decisions.

Most companies will benefit by building a control tower in their operations. A control tower uses a host of smart technologies to highlight bottlenecks, respond to events, optimise resources and make recommendations on what to do next.

2.  Boost supply chain resiliency with sustainable and diverse sourcing

No organisation can afford to ignore the move towards greater supplier diversity. It’s not a nice-to-have; it’s imperative to building resilience to weather disruptions. For some COOs, this means localising or nearshoring their suppliers. For others, ‘glocalisation’ is the way, balancing local and global options to stay competitive. Either way, it’s important to choose suppliers who contribute to resiliency, better ESG outcomes and more cost-effective and innovative approaches.

Another advantage of diverse suppliers is that they tend to be more localised to your manufacturing and distribution sites, which in turn has a ripple effect of helping local businesses buy the goods and services they need to sustain their own operations. That’s why the long-term play here is to shift from a mindset of pure cost savings to one that combines social value, sustainability and cost savings.

3.  Become omni-capable

The pandemic sparked new challenges for organisations around how they fulfil expectations from customers. Particularly in retail, we’re seeing customer preferences shifting towards home delivery, adding a new layer of complexity to an already stretched supply chain. Many brands and manufacturers are even reconsidering whether they should sell directly to consumers online, alongside their traditional sales channels.

The answer lies in becoming ‘omni-capable’, which is an evolution of the omni-channel fulfilment strategy: to be able to deliver a product and accept it as a return, whether from brick-and-mortar

stores, regional distribution centres, e-commerce sites, third-party networks or any other point in the journey to the end customer. Again, this isn’t an option: it’s table stakes for delivering optimal customer experiences.

To make the necessary changes, organisations must shape a cost-effective supply chain that meets consumer expectations and offers regularly updated inventory visibility. In doing so, they can also potentially spend less on fulfilment while better understanding how to orchestrate their ecosystem of suppliers and partners, as well as how to adjust operations to ensure business continuity.

4. Build cyber-resilient operations

It’s one of the challenges of our time. Businesses want to invest in technology and innovation to build resilience, but digital transformations bring with them vulnerabilities and risks that have created rich pickings for cybercriminals.

The first rule in building cyber-resilient operations is to assume you will be attacked. It’s not a matter of if; it’s a matter of when. Further, having detection and response in place is key to disrupting and preventing ransomware attacks. If you don’t have a policy or processes in place to act, start now.

It’s also vital to create a culture shift across the business that puts cybersecurity at the forefront of technology planning. Security by design, where security becomes embedded into the design process for every new technology initiative, is one of the best ways to protect the organisation from cyber-attacks generally and ransomware attacks specifically.

Summary

By anticipating disruption and its impact, and baking resilience into every aspect of your business, your organisation is better able to not only manage downside and outside risks, but upside ones as well: the risk of letting an opportunity slip through your fingers.