A Senior Management Guide to Surviving Supply Chain Disruption

In the last 25 years, we have faced multiple economic and geopolitical challenges, including  9/11, the wars in Iraq and Afghanistan, the coronavirus pandemic and an environment where tariffs are being used to influence global trade.

With tariffs, the Trump administration has three primary goals:

• Mandate that the countries we buy from offer reciprocal tariffs on what we sell to them, thereby creating a favorable environment where American products can have a more robust export opportunity
• Inducing foreign countries and companies to increase their investments in the U.S. by building factories, providing more direct investment and increasing their business development operations here
• Bring back manufacturing to the U.S., particularly with critical product lines.

These goals have certain merit, but they have also created chaos, disruption and uncertainty in global markets. While there are some success stories in the mix, American and foreign businesses are not happy with the mayhem. Business executives always strive for stability and conditions that open the door for opportunity, growth and higher margins — but in the chaos of the past eight months, those goals are at great risk.

Signs as to whether the administration’s strategies are or are not working should soon begin to emerge.

The midterm elections in November will (1) determine if the Republicans will hold both the House and the Senate and (2) potentially open the door for a Democratic mandate in the 2028 presidential election. These factors will determine the direction of the American economy and how the world will or will not follow.

Irrespective of the political outcome, senior management must provide navigational guidance and leadership to enable their companies to manage disruption and not only survive, but also create opportunity for growth and higher margins.

The Eight-Step Playbook

Eight steps can help senior management of organizations with a footprint in global trade navigate disruptions and keep their companies stable and prosperous:

1) Recognize that disruptions will occur over time as part of a global realigning of order. Consider this analogy: Hurricanes, forest fires and tornados create havoc, alter geography and harm people, but scientists know that this process is a “cleansing solution,” knocking down old growth and setting the stage for the renewal of shorelines, forests and land mass, leading to new growth and a healthier natural environment.

2) Rise to meet the obligations of true leadership. Become a beacon of hope and resolve. While taking command of the situation, also “muster the troops” to do their part, and as a team, create a collaborative atmosphere that heralds positive attitudes and mindsets that “we can overcome whatever is thrown at us.”

3) Lead the management team in planning for disruptions. The analogy here is the military, whose structured war games create scenarios that mimic potential real-time situations, helping to prepare proactively for disruptive events.

4) Recognize that while each silo of a company will prepare differently, all functions in a corporate structure need to collectively row in the same direction, at the same pace, and in harmony.

For example, the finance function might create a contingency fund while demand planning might create additional safety stock levels that can be accessed if necessary.  Operations might create simulations of disruptive events and set up how the team will respond.  All are important separate steps, but each is aligned to the singular goal of preparation, which is critical in disruptive management.

5) Bring in external expertise to help design proactive strategies, benchmarked with like and similar companies and global supply chains. There are many consulting companies that provide disruptive solutions in advance.

As an example, in areas prone to hurricanes, many companies, as part of their contingency plans, purchase access to secure office space for which they pay in advance. The space has all the operational needs, requirements and technology connections ready to go and can immediately be accessed in an emergency.

6) Build a risk management culture within your organization. This creates a pathway for the executive team and managers to stop “chasing costs” and work towards obtaining the best spend value.

A risk management culture will tolerate some level of risk but works more aggressively towards decisions that mitigate risk, such as striving for resilience and sustainability in the general business model as well as in the footprint in global supply chain management. This approach creates the best opportunity to obtain both resilience and sustainability, both admirable goals that are typically directed by the C-suite.

7) Conduct “fire drills” to ensure you’re prepared. Having been in the U.S. Navy, I have a strong recollection of proactive risk management. Almost every day onboard a ship, there are continuous drills that simulate a fire, explosion, hull breach and other serious threats. Teams are set up to take charge of certain situations, and daily simulations and “fire drills” facilitate advance preparation.

Preparation is a huge part of disruption management. We may not be able to anticipate every threat, but we can cover those most likely to happen, based on historical experiences and proactive thinking.

8) Set up standard operating procedures (SOPs). Most successful companies have SOPs — protocols and written guidelines that outline the operational framework of its structure and operations. Include, in writing, SOPs around emergency preparedness, with an update process based on history, experience and well-thought-out anticipative events.

Make Preparation the Choice

We know from an historical perspective that some companies and organizations fail when disruption occurs. How much of that is due to bad luck or lack of preparedness, we can only guess.

In working with hundreds of both large and small companies during disruptive events, we have witnessed that companies with good leadership and preparedness in their culture fare much better than those that don’t.

Preparation — in almost every aspect of life and in business — will determine a company’s ability to survive and prosper through disruptive events.

The upshot: Senior executives have a choice as to how to focus their management teams and employees. By leading with a risk management and preparedness culture, we create the best opportunity to keep the boat sailing in turbulent seas.

(Photo credit: Getty Images/Krblokhin)