Last updated: Supply chain resiliency: Three lessons from COVID

Supply chain resiliency: Three lessons from COVID


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The average consumer became painfully aware of what supply chain resiliency meant in 2020. And unfortunately for many businesses, COVID and its cascade of risk events proved to be the perfect storm for supply chain disruptions. Traditional risk management approaches were unable to keep up with the rapidly evolving supply chain risk landscape.

Many retail and e-commerce businesses were forced to rely on limited and outdated information for their suppliers. As a result, they faced critical shortages and significant disruptions in their supply chains.

It’s clear why improving supply chain resiliency is the focus for most businesses post-COVID, but doubling down on practices that had limited effectiveness during the pandemic isn’t the answer.

Enabling better resiliency requires modernizing supply chain and related risk management approaches, not implementing more of what didn’t work.

Before we can determine which investments to prioritize in 2021, it’s critical to understand where current practices failed. Because, let’s face it, we’ll get past the COVID crisis, but as disruption risks are increasing in frequency and severity, the need for resiliency is here to stay.

Supply chain resiliency: Three lessons learned from COVID

There were three key lessons that arose via the pandemic – and these are crucial to improving supply chain resiliency moving forward:

  1. Reliance on static assessments is ineffective in rapidly changing risk environments.
  2. Focusing on a limited view of risk leaves companies exposed to significant supply chain disruptions.
  3. Your supplier network can expose your operations to supply chain disruptions.
Let’s review each point in further detail:

Reliance on static assessments is ineffective in a rapidly changing risk environment.

Resiliency requires proactive risk mitigation actions. Since you can’t proactively mitigate what you don’t see coming, an early warning of changes in your risk landscape is critical.

Static assessments, health reviews, and risk reports prepared in the year or even months before COVID proved to be stale and ineffective as the risk landscape rapidly evolved.

Retail and e-commerce companies with a continuous monitoring capability had a greater understanding of their supply chain in real-time enabling more resilient responses than those relying on stale assessments.

Focusing on a limited view of risk leaves companies exposed to significant supply-chain disruptions.

Resilience requires a comprehensive view of the entire risk landscape – not just financial or cyber risk. Let’s use COVID to illustrate this point.

COVID started as a location-based risk in Wuhan, China before it rapidly spread around the globe cascading into people risks (i.e., absenteeism), regulatory risks (i.e., mandatory shutdowns), cyber risks (i.e., non-secure work from home environments), infrastructure risks (i.e., local healthcare and internet availability), and finally financial risks as suppliers’ revenue was impacted.

During this crisis, financial indications were not an early warning that there was going to be trouble in supply chains – they were, in fact, a lagging indicator.

In this instance, companies reacting only after a supplier experienced financial trouble would have been an ineffective risk mitigation approach that would have left them behind their competitors who were proactively monitoring a wide range of supply-chain disruption risks.

Your supplier network can expose your operations to supply-chain disruptions.

For many businesses, 2020 brought a new awareness of additional weak links in their supply chain from 4th or 5th parties (often called Nth parties), with the potential to challenge the effectiveness of their overall supply chains. Companies that had a view deep into their supply chains beyond their direct suppliers to include their Nth parties had an advantage of those who did not when managing the supply-chain challenges of 2020.

Investments to make for increased supply chain resiliency

As supply-chain resiliency requires a comprehensive view of risk and knowing in real-time when the risk landscape changes, companies should prioritize the adoption of continuous supply-chain risk monitoring across a wide risk framework.

The risk framework must monitor supply-chain disruption risks beyond financial to include supply-chain disruption risks such as cyber, governance, regulatory, environmental, societal, operation, compliance etc. and location risks such as political, infrastructure, extreme weather, infectious disease, social unrest, etc.  An ideal continuous monitoring solution also should incorporate Nth parties.

While improving resiliency is critical, unfortunately, many companies are currently experiencing considerable financial pressure and feel limited in their ability to make new investments. As an alternative, companies can shift budgets from old ineffective practices to these new proactive approaches.

It was clear during 2020 that retail and e-commerce supply-chain resiliency had a direct impact — not just on operations, but on the revenue of these businesses. Companies that recognize the shortcomings of old practices and evolve to a modern, proactive supply-chain risk management approach of continuous monitoring across a wide risk aperture will reap the benefits of improved supply-chain resiliency well into the future.

Keep your supply chain connected,
reliable, and resilient –
no matter what.

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