By Paul van Nierop, Executive Supply Chain Planning Solutions, Barloworld Logistics
Globally, business is moving into a period of higher market disruption - with economic upheaval, political uncertainty, and industry innovation all challenging the ability to sustain market positions through traditional business models.
As the latest Barloworld Logistics supplychainforesight survey revealed, the majority of local business leaders recognise that their organisations will need to adapt to change. However, they felt that changes implemented in their business model or supply chain only succeeded 25% of the time.
So where are these strategies going wrong?
Arguably, there is a lack of insight into certain key areas. In our view, one way to successfully navigate change is through developing a deep understanding of one’s business risks, and then mitigating these risks through establishing a resilient supply chain. Notably, supply chain resiliency implies a quick recovery from disruption and a high tolerance of change. Moreover, supply chain modelling allows an organisation to accurately identify potential risks in their supply chain and to develop mitigation strategies through the analysis of risk scenarios. Critically, supply chain risk is no longer limited to ensuring that the right products are in the right place, at the right time. Factors as diverse as natural disasters, globalisation, single supplier dependence or critical IT system downtime can all wreak havoc on an organisation’s ability to create shareholder value and sustain hard-fought momentum.
Creating a resilient supply chain
Looking ahead, creating a resilient supply chain starts with engaging in a process of assessing, prioritising, analysing and planning for any and all types of risk scenarios. Supply chain models put together complete views of an organisation’s supply chain in order to allow for continual optimisation, rapid reaction to changing markets and the testing of new strategies. Added to this, risk exposure summaries and visualisation tools allow for the easy identification of potential issues, and to the designing of strategies for coping with them. Interestingly, simulating supply chain variability shows the effect of downtime of critical sites on the reliability of the entire chain - since even the most established of supply chains have weaknesses. This has been demonstrated by a variety of events affecting major brands and companies, including natural disasters, political turmoil and economic crises.
Within the South African context, businesses are often faced with localised disruptions through labour unrest, Rand volatility and unstable infrastructure, and it is critical for local organisations to understand and prepare for such events. Without a doubt, the modelling of local “what-if” scenarios allows organisations to understand the impact that disruptions such as strikes, power shortages, cable theft, and unplanned plant shutdowns have on their ability to conduct business.
Given the complexity of the modern supply chain, it would be highly unlikely that an organisation would be able to predict and prepare for every eventuality. However, those engaged in smart optimisation and risk simulations are able to embed resilience by addressing critical vulnerabilities. This, in essence, is a way of future-proofing an organisation - at every level.