Gartner: Supply Chains must be ‘Geopolitically Elastic’
It’s certainly a tough time to be a Chief Supply Chain Officer.
In fact, amid economic uncertainty, geopolitical tension and extreme weather events, it’s been a difficult few years.
Gartner’s advice for CSCOs? Proactively embrace a geopolitically elastic supply chain strategy in a bid to support their organisations’ growth objectives.
The consulting giant says an elastic supply chain capability, which can expand or contract supply in response to geopolitical risks, provides supply chain teams with greater flexibility and efficacy than operating from a single geopolitical bloc.
"The natural response to recent geopolitical tensions has been to operate within ‘trust boundaries,’ which are geographical areas deemed comfortable for business operations,” explains Pierfrancesco Manenti, VP Analyst in Gartner’s Supply Chain practice.
“However, there is a risk that these strategies are taken too far, as maintaining access to global markets and their growth opportunities cannot be fulfilled by operating within just one geopolitical bloc.
“Instead, CSCOs should embrace a more flexible approach that reflects the fluid nature of geopolitical risks and positions the supply chain for new opportunities to support growth.”
Defining an elastic supply chain
In its latest executive report, ‘Empowering Growth Through Geopolitically Elastic Supply Chains’, Gartner’s recommendation is that CSCOs consider a strategy that is flexible enough to pursue growth amid current and future geopolitical challenges, as opposed to attempting to permanently shield supply chains from these risks.
The firm has outlined three key categories of action that define an elastic supply chain capability:
- Understand trust boundaries and define operational limits: Large organisations are often dependent on sourcing a variety of raw materials, working with global suppliers and accessing growth opportunities in developing markets. Gartner says their CSCOs must increasingly work outside established geopolitical comfort zones, or “trust boundaries”. It’s therefore crucial to determine the organisation’s operational limits that incorporate both risk and values-based criteria from stakeholders before qualifying new business opportunities. Such limits are designed to safeguard reputation and legal standing.
- Assess the elastic supply chain opportunity: An elastic supply chain is one that seeks opportunities to expand into new markets and identify new areas to build capacity. However, Gartner asserts that CSCOs must assess the implications of leveraging an elastic supply chain opportunity, including by building a business case to clarify the benefits of the operation.
- Use targeted, market-specific scenario planning: The importance of effective scenario planning has been heightened in recent years given the changing nature and interconnectedness of geopolitical risks. A Gartner survey of 258 supply chain leaders in January 2024 showed the vast majority (88%) of respondents expect a positive impact – varying from moderate to very high – as a result of scenario planning when faced with geopolitical risk. Experts say that, in conducting such planning, CSCOs must collaborate to identify the top risks facing their organisations and the markets they operate in – as well as how these risks could evolve over time.
Anticipating geopolitical shifts
Offering parting thoughts, Pierfrancesco says: “Effective scenario planning must incorporate the changeable nature of geopolitical risks, with AI and advanced analytics playing increasingly important roles in analysing data from suppliers, governments and the media.
“The best supply chains anticipate – rather than merely react to – geopolitical shifts that present new opportunities or risks.”
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