In the intervening years we have witnessed various environmental disasters, including fires, floods and droughts; the threat from Brexit; and the unsettling effects of the looming trade war between the US and China.
To top things off, we are in the middle of a new crisis brought on by the coronavirus Covid-19. Output from factories and export traffic through ports in affected regions has slowed dramatically, which means foreign customers will shortly be out of stock in many product categories, including critical spare parts.
What this most recent crisis has revealed is the extreme dependence many businesses have on single source manufactured inputs, and the brittleness of our supply chains. We have gone too far down the path towards single sourcing in pursuit of best prices, while also cutting back on inventories along our supply chains, all in the name of reduced cost and increased efficiency. The Covid-19 crisis has exposed the folly of this strategy.
We now need to revisit the principles upon which we design our enterprise supply chains. We have to return to the idea of diversity in our supply-base; re-think how we manage suppliers; accept that some level of embedded redundancy in our networks is prudent and necessary in order to buffer against sudden unexpected shocks; and we need a portfolio of supply chain designs that can operate under a wide range of market conditions, from predictable baseload demand, through to extremely uncertain and disruptive conditions. This is the new reality for the future.
The current crisis also highlights the important role that digitalisation can play in risk management, and the value of increasing investment in control towers and associated tracking technology.
Thoughtful action to address resilience in our supply chain designs is essential if we are to dampen the effects of future crises, whatever their source. And harnessing technology to achieve end-to-end visibility in our supply chains, and to enable faster and more informed decision-making, will be a key ingredient.
John Gattorna & Deborah Ellis, Authors of Transforming Supply Chains
For specific information on these designs, refer to Transforming Supply Chains: realign your business to better serve customers in a disruptive world, FT Publishing, Harlow, 2020.
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