The Covid-19 pandemic, which has shuttered factories, offices, and facilities around the world, has brought into sharp relief the importance of supply chain resilience.
According to a report by US-based consulting firm AT Kearney, as many companies found they had limited means to cope with the sudden shock to their global and regional supply chains, they incurred “gut-wrenching” losses and faced ongoing operational uncertainty.
“Those harsh lessons demonstrated that, over time, supply chain resilience will be as vital to your profitability as supply chain cost and performance,” the report states.
And true resilience extends well beyond traditional disaster-scenario planning. “It is about having the capability and capacity to rapidly flex or repurpose assets across your extended supply chain in response to unanticipated supply shocks (for example trade wars and cataclysmic weather events) and permanent demand shifts (shifting customer requirements, new channels, new competitors).”
Companies need to gauge their resilience across a variety of dimensions – from geography, planning, and suppliers, to inbound transportation and outbound distribution.
This enables them to identify where they are most vulnerable to unanticipated shifts and future crises.
The report makes it clear that the status quo is not sustainable. “Supply chain strategy must now rapidly evolve to incorporate the lessons learned from the historic disruption of Covid-19. For companies running complex global supply chains, this means recognising the wisdom of sacrificing cost and performance, to a reasonable degree, to reduce exposure to both catastrophic losses and gradual erosion of profits. Companies that move now to make their supply chains more resilient and agile will gain a sustainable strategic advantage over the coming years and decades.”