Pearson on Excellence: The dynamic supply chain’s bridge over troubled waters

From a business standpoint, the first 10 years of the 21st Century have been anything but normal. Economic turmoil is almost constant, currency valuations shift with the wind, and bank lending vacillates between lenient and tight-fisted.

What many people are saying, in fact, is that this state of volatility may actually be permanent: a “new normal” characterized by abnormal business conditions.

According to a recent Accenture survey, executives are acutely aware—and quite concerned—about this apparently ceaseless state of sudden changes and rapidly shifting paradigms. Seventy percent of more than 3,000 decision makers we polled expressed dissatisfaction with their company’s ability to predict future performance.

And more than 80 percent said that they are worried about the resilience of their supply chains—specifically the ability to adapt operationally to rapid changes in products, markets, and currencies.

The impact of a new normal on companies’ supply chains is potentially huge. But what sort of changes should companies consider as a result? In our view, one of the best solutions is reinventing the supply chain as an adaptable, malleable ecosystem of processes, people, capital assets, technology, and data.

In other words, what you want in this volatile age is supply chain capabilities that:

• Help anticipate, identify, and mitigate risk.

• Respond quickly and decisively to sudden market and product shifts.

• Make it easy to rebalance supply/demand behaviors based on changing conditions and customer needs.

• Contribute to competitive advantage and profitability by leveraging hard-to-replicate process-management skills.

• Adopt the right level of flexibility for every link in the supply chain based on an often-shifting value proposition for each customer, product, and geographical segment.

Simply put, the “dynamic supply chain” we’re proposing facilitates maneuverability in unpredictable markets. This may sound like something companies have always wanted, but the reality is that few organizations have achieved true supply chain dynamism. They’ve made tremendous progress, but the emerging state of permanent volatility demands more.

Doing more
No two dynamic supply chains will be precisely alike, even among industries, geographies, or business units within the same company. There is a common trait, however: speed to outcome within each functional domain. There are also at least five largely universal components of any dynamic supply chain.

An adaptive operating model. This is a living, breathing design geared to ensuring that supply chains align fully with growth and innovation strategies and embrace processes and systems that help companies rapidly scale or shutter operations based on short-notice demand signals.

New skills in risk anticipation and mitigation. “Speed of response” is a critical characteristic of dynamic supply chains, and one way to get it is with advanced risk prediction and identification capabilities. Unfortunately, only 11 percent of the aforementioned survey respondents actively manage supply chain risk and only 18 percent have formal supply chain risk management systems in place.

Enhanced visibility and information acquisition. Maximizing responsiveness and adaptability means you excel at gathering, analyzing, and applying information contributed by each link in the supply chain. Leveraging visibility and marshaling better information can also mean integrating your supply chain systems with pricing, promotion, sales, and marketing applications.

Executional excellence. Companies focused on the development of dynamic supply chains don’t overlook the importance of investing in core business processes.
Supply chain sophistication and professionalism. It’s essential that the organization as a whole understand all components of a dynamic supply chain strategy, and this means developing superior supply chain skills and ensuring that the entire company is receptive to new ways of operating.

How necessary?
Can a typical company justify the changes needed to create a dynamic supply chain? Most likely, yes, because today’s state of permanent volatility can severely impede the logistics operations of most organizations.

Still, there are many questions companies can pose to help determine the intensity of their need. For example, they can question their current level of adaptability. Another evaluation perspective might be to question strategic value. Lastly, companies might view the issue from a growth perspective.

Addressing the above questions won’t produce a go/no-go decision, but it could shed more light on the game-changing shifts occurring in the global business community, as well as on a supply chain solution for helping them respond to those changes in a profitable and competitively advantageous way.