In case you’ve missed it…we’ve been publishing a series of posts about the top ten 2024 supply chain trends announced by the Association for Supply Chain Management (ASCM) in September. Each week, we’ve covered a different topic on the list to see how it’s playing a role in supply chain management (SCM).
So far, we’ve tackled:
This week, we’ll take a look at #7 on the list: Agility and Resilience.
Over the next three weeks, we’ll dig into each of the remaining top-ten categories, which include:
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Cyber Security
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Green and Circular Supply Chains
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Geopolitics and Deglobalization of Supply Chains
Agility vs Resilience
Citing the many disruptions to the supply chain in recent years, global consulting firm Deloitte says in Building Operational Resilience and Agility that in addition to the “near-term imperative of financial viability,” organizations are in pursuit of two key objectives: “first, recovery from short-term disruptions (be more resilient) and second, grow ahead of peers to sense and prepare for fundamental shifts in demand and supply (be more agile).”
The firm differentiates further between the two, explaining that:
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Operational resilience is a supply chain’s ability to “absorb, respond, and recover back to an existing state after a supply or demand shock.”
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Operational agility is a supply chain’s ability to “evolve quickly and profitably, especially relative to competitors in response to a fundamental shift in supply or demand.”
In a recent article for Semiconductor Engineering, “Supply Chain Resilience And Agility: Two Critical Sides Of The Same Coin,” Bettina Weiss, Vice President of Business Development and Product Management at global semiconductor industry association SEMI, also describes the difference between agility and resilience.
“Resilience connotes a strategic view of the supply chain over at least one year, with a focus on the design of the supply chain network,” Weiss writes. “But agility – the ability to be flexible, nimble, and quickly adjust to disruptions over a shorter term, typically less than one year – is equally important. Agility suggests a transactional focus on any change in demand or supply across the supply chain. A holistic view of the end-to-end supply chain needs to zero in both agility and resiliency.”
Noting the growing urgency for effective operational resilience and agility to “help businesses absorb short-term shocks and evolve during long-term shifts,” Deloitte says getting there will require organizations to “go through a transformational journey…”
A dearth of supply chain resilience
In this context, global consulting firms Gartner and PWC concur with the need for change.
According to PwC’s 2023 Digital Trends in Supply Chain Survey, only 34% of operations leaders “cited increased resilience as one of their top objectives when investing in supply chain technology,” and 86% “agreed or strongly agreed that their company should invest more in technology to identify, track and measure supply chain risk.”
“The findings track with our experience that many companies either find the concept of resilience too vague or take for granted that their supply chains have adequate digital capabilities to maintain operations during delays and other obstructions,” PwC says. “In addition, many don’t recognize that risk mitigation by itself isn’t a business continuity plan, and that investing in resilience better enables you to ‘look around the corner’ versus simply responding to immediate threats.”
Additionally, when asked about their priorities in the next 12-18 months, only 23% of those surveyed chose “increasing responsiveness and resilience” as among their top three priorities — which were outpaced by increasing efficiency (58%) and reducing costs (54%).
“That tepid response is understandable considering many supply chain leaders have been putting out fires after recent disruptions, but shifting your resilience strategy from short-term risk mitigation to long-term stability is critical for growth,” PwC explains. “Driving growth was the most commonly named top objective of supply chain technology investments at 53%, but only 34% said increasing resilience — suggesting many executives aren’t connecting resilience to growth.”
In an analysis published early last year, Gartner predicts that by 2026, 95% of companies will have failed to make end-to-end (E2E) resiliency in their supply chains a reality.
Explaining that “marketplace confusion” over resiliency is contributing to “inadequate” technology solutions, the firm says most companies will cling to an “outdated model” that holds them back from achieving the E2E resiliency that’s needed.
Gartner says its analysis indicates that “few companies have accepted the necessary paradigm shift from being forecast-driven, and primarily focused on accuracy, to instead focusing on managing uncertainty in their supply chains.”
Until this shift takes place and technology providers “align solutions specifically for achieving resiliency, rather than simply increasing decision speed or digitizing the supply chain,” it will be difficult for most organizations to achieve true E2E supply chain resiliency, the firm says.
“Companies are scrambling to add resiliency to their supply chain programs today, but ironically they are taking actions that may lead to more fragile and rigid supply chains based on outdated ‘steadier state’ models,” says Tim Payne, vice president analyst with Gartner’s Supply Chain practice. “A current focus on ever improving accuracy results in supply chains unable to cope with today’s uncertainties and simply reinforces their vulnerabilities.”
Strategies for improving agility and resilience
Gartner’s Payne says when marketplace stakeholders are confused about the concept of resiliency, technology solutions can more easily be “remarketed” as addressing it without ever providing what’s needed to achieve the flexibility and adaptability needed to achieve true E2E resiliency.
His firm offers several recommendations to help companies avoid ineffective “resiliency-washing” technology solutions and head toward true E2E resiliency — starting with a reinvention of their strategies. In this context, Gartner recommends that organizations:
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Drop forecasting-based models — and “enable the company’s supply chain to take full advantage of its uncertainty mitigation tactics by not constantly propagating its demand signal through the supply chain. Change the planning focus onto uncertainty rather than exclusively on the plans’ accuracy.”
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Drive from unknown uncertainty toward known variability — by “utilizing AI and ML for different, multiple predictions.”
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Begin to build a digital supply chain twin (DSCT) — by “identifying key model parameters that would help to improve the resiliency of decisions.”
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Assess supply chain decisions using uncertainty metrics rather than accuracy metrics — by “deploying KPIs that describe the supply chain’s capability to tolerate uncertainty and the ‘probability of execution’ of relevant supply chain decisions.”
Deloitte also offers specific strategies for organizations to help them move toward improved agility and resilience, describing first steps for each:
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Building agility: “The first step toward achieving agility is to map the supply chain ecosystem with real-time data on inventory, supply, distribution, production capacities, and customer demand. The key is to be able to assess and analyze transactional data to generate insights on paradigm shifts in supply chain and customer demand quickly.”
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Building resilience: “The first step toward building operational resilience is to identify the nodes that are potential sources for disruptions and understand the supply chain interdependency of all the ecosystem partners associated. All the ecosystem needs is to connect a digital core that continuously and automatically monitors risks across internal and external operations.”
For additional details, please see Deloitte’s resource, Building Operational Resilience and Agility.
ASCM’s new resilience certification
In a nod to its inclusion of agility and resilience in its top-ten list, the ASCM announced in early December that it had launched its new Supply Chain Resilience Certificate.
“The certificate provides experienced supply chain professionals with comprehensive knowledge of the concepts, practices and trends related to organizational and strategic supply chain resilience,” the announcement said.
“Resilience is like the superhero cape for supply chain professionals. It gives them the power to help their supply chains bounce back from disruptions, whether it’s a global pandemic, natural disaster or unexpected shift in demand,” said ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE.
“In a world where supply chain disruptions have become more frequent and unpredictable, the need for resilient supply chains is paramount.”
The ASCM Resilience Certificate “enables supply chain leaders to adapt and find solutions while ensuring the supply chain remains robust and efficient even in the face of challenges,” according to the press release.
According to ASCM, after completing the courseware (six modules) and passing the exam, certificate earners will be able to:
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Integrate resilience into supply chain management
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Manage risk in supply chains
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Make data-driven decisions
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Strengthen supplier collaboration and relationships
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Prepare for potential disruptions using data and strategic planning
The ASCM said it started assessing resilience in 2020 when they commissioned an Economist Intelligence Unit white paper, Supply Chain Resilience for an era of Turbulence:
“This report was based on a series of in-depth interviews with leading subject matter experts from around the world and found that more focus is needed on how companies and industries can take effective steps to build resilience into their supply chains.”
Learn more about the Resilience Certificate.
