Taking Your Supply Chains for Granted Can Cause Bad Things to Happen

Gartner recently released its 2020 Supply Chain Disruption Management and Impact Survey. Only 17% of the companies were deemed to have “fit” supply chains, a.k.a. a supply chain that enables them to effectively move ahead after experiencing disruptive, “high impact” events. The “fit” supply chain stands in stark contrast to the “fragile” supply chain, which causes companies to be “left far behind after high impact events.”

Frankly, I wasn’t surprised by the survey results. Over the past 18 months, there have been a lot of these high impact events. And that is why I have had several (more than 25) conversations with C-Level executives who are now becoming aware that their company has a “fragile” supply chain—and they are not too happy about it!

These fragile supply chains are causing operational disruptions, skyrocketing freight costs, and worst of all, the cancellation of millions of dollars in sales orders. As one CEO shared, “you know things are crazy when you’re put on 'allocation' and you have to make critical SKU rationalization decisions.”

This is what we warned about in a recent blog, “Get Serious or Get Seriously Hurt.” CEOs cannot delegate building great supply chains. They must be involved in critical supply chain decisions or bear responsibility for the consequences of broken supply chains.

When supply chains break down you can have a different dialogue with CEOs and Presidents about their company’s supply chain capabilities, and their decisions affecting those capabilities. Invariably, at some point, these executives will ask questions about how their companies can prevent disruptions in the future. Candidly, most are caught a bit off guard by my response: “Stop taking your supply chain for granted!”
 

Since most CEOs don’t want to believe they are taking their company’s supply chain capabilities for granted, I often ask three questions to clarify:

1. Has your company “mapped” its supply chain in the past 12-18 months to identify risks and threats with critical suppliers whose inventory / materials could disrupt your operations and ability to satisfy customers?
2. Does your company have a written Supply Chain Disaster Recovery Plan that addresses different scenarios and identifies actions that can/will be taken when you experience supply chain disruptions?
3. Does your company have a written Transportation Spend Management Plan that identifies procurement, operational, and sales processes that affect your costs and how you manage your carrier relationships?

How would your company answer these three questions? If the answer to all three is “No,” then perhaps your company is taking its supply chain for granted, and there may be some “supply chain denial” going on.

That is why my presentations address the supply chain myths that CEOs tell themselves to avoid dealing with their supply chains. But after the myths, I also address some supply chain truths. One important truth is: “We get the supply chain we are willing to accept and live with.”

What type of supply chain are you willing to live with?  

Companies create plans for things that are deemed critical to their success. So if they have plans for IT/Cyber Disaster Recovery issues, CapEx investments, and for their Sales and Marketing strategies, wouldn’t it make sense to also have a written disaster recovery plan for their supply chain or a plan for how they will manage their freight activities when disruptions occur? An effective supply chain plan will help companies focus on their priorities and the investments needed to meet those priorities.

Here is an important question: “Can your company take its supply chain for granted?”

In this “Code Red” Transportation environment with skyrocketing rates and capacity issues resulting in delays and disruptions, the answer is a resounding “NO!”

With 2022 shaping up to be even more challenging for shippers than 2021, every shipper should have written transportation and supply chain plans that include strategies for containing costs and how you will manage freight under challenging scenarios. For example, how will your company manage if:

• Capacity issues in the Ocean and Trucking sectors continue well in to 2022, resulting in significant increases in Truckload, LTL, Parcel and Ocean rates?
• Carrier service issues make it more challenging to figure out when your goods will be delivered?
• The West Coast ports experience more delays as the ILWU labor contract negotiations become more intense?

In closing, Booker T. Washington had a daily exercise to prepare himself for whatever came his way: “When I begin my work in the morning, I expect to have a successful and pleasant day of it, but at the same time I prepare myself to hear that one of our school buildings is on fire, or has burned, or that some disagreeable accident had occurred….”

With that thought in mind, let’s stop taking our supply chains for granted and be prepared to meet the forthcoming challenges.