Organizations are starting to rethink how they look at their supply chains, driven by disruptions in recent years, culminating in the coronavirus (COVID-19) pandemic. “Since the outbreak earlier in the year, the global pandemic, as it’s spread around the world, has completely redefined global market dynamics, consumer behavior, the way companies look at their business practices and overall network design,” said James Lisica, senior research director — global supply chain and logistics at Gartner, the Stamford, Connecticut-based global business research and advisory firm.
Speaking at the virtual 2020 Gartner Supply Chain Symposium/Xpo — Americas last week, Lisica said that the pandemic has redefined companies’ potential actions and strategies — whether balancing agility against scale, focusing on speed versus cost reduction or concentrating on globalized or localized capabilities.
Still, he added, other disruptions have also driven companies and chief supply chain officers (CSCOs) to reconsider strategies and look for opportunities. The disruption list is long: It includes geopolitical events, economic concerns, Brexit, digital transformation, cybersecurity breaches, social media impacts on how consumers view and rate companies, and corporate social responsibility measures, such as reducing carbon footprint.
“The changes have been so immense that two out of every three CEOs and CFOs we talk to anticipate that they are going to have to change their business models,” said Lisica, whose presentation was called, “A CSCO’s Guide to Developing Dynamic Supply Chain Strategies to Navigate an Evolving World.” For example, they may change how they design, manufacture or distribute their products or the markets they look to, he said.
“There are changes that are coming that the supply chain will need to prepare for, and CSCOs will need to design strategies that are robust and agile enough to deal with these things on the fly,” he said.
In the past, companies have turned to cost-cutting measures to manage disruption. But this challenged their ability to drive innovation and new business initiatives and attract new talent, Lisica said. Competitive advantage, however, can be driven by looking at longer-term outcomes — something being done by more successful companies, he said.
“They take a different view of what value looks like,” he said. Among other measures, the more successful companies improve process and customer experience, as well as invest in (1) increased capability, (2) talent and (3) technology to drive cost optimization, not cost reduction. Additionally, they promote innovation, often through emerging technologies, he said.
“What we see is that companies that are driving the most effective supply chain capabilities today and delivering the highest levels of efficiency and cost reductions are the companies that take a holistic approach to how they design and manage their supply chains,” Lisica said.
To move forward, companies need to no longer take a fragmented approach, he said. They should build capability into their strategies on a holistic level and be willing to take risks and do things differently to drive competitive advantage, including:
- Developing visibility into data, using it to drive supply chain decision-making
- Understanding performance metrics to drive supply chain response to achieve corporate goals
- Understanding how their processes impact their ability to respond to disruption.
Companies also must look at their risk appetite — are they taking risks when others are not? “Companies that take calculated risks, whether that is investing in new business models, technology, people or innovation are the companies that deliver competitive advantages,” Lisica said.
“Risk is now part of supply chain,” he said, and must be embraced. Investing in the right capabilities and talent can enable them to respond to that risk, he added. Additionally, investing in technology, particularly new and emerging technologies, can help drive innovation and improve competitive advantage, he said.