A Boston Consulting Group (BCG) study suggests just 10% of companies are truly prepared for supply chain disruptions.
The study found that, of 150 companies, just a tenth are able to anticipate and recover from a crisis in the short term and be resilient in the middle- and long-term.
Most of the remaining 90% are simply reacting to crises as they occur, BCG says.
BCH says nearly all companies “must increase their investments in capabilities that enhance their resilience”, and adds “organisations that invest significantly can create a potent source of competitive advantage”.
Among the risks companies are failing to plan for include disruptions in their own plants, interruptions in supply from vendors, and external risks, such as geopolitical events and natural disasters.
As a result, BCG says when crises occur, these organisations “lack the ability to quickly identify and assess risk, react fast, and absorb the impacts of the disruptions across the supply chain”.
In response BCG released an operations resilience framework that include the following:
1. Establish visibility and assess risks
Companies that want to build resilience need to have a clear view of inventory across suppliers, manufacturing plants, warehouses, logistics providers, and customers.
Such visibility, says BCG, enables robust end-to-end planning and inventory management and makes it easier to rapidly assess the impacts of potential disruptions.
To establish full visibility, it says organisations should gain insight into the operations of suppliers, all the way back to raw material sources by using an always-on network map to display flows across the various tiers.
2. Monitoring events & scenario planning
The faster companies can react in a crisis the likelier they are to secure advantage in acquiring scarce materials or capacity, says BCG. It says a speedy response involves monitoring external events that might impact operations across the supply chain, and proactively send alerts of potential deviations and disruptions. Scenario planning and crisis response plans are other suggestions.
3. Have an integrated sourcing strategy
Organisations should design their supply chain network to reduce single points of failure, increase supply redundancy, and shorten the supply chain, says BCG.
It adds that recent crises have shown that sourcing requires a more integrated strategy than in the past, and that organisations need a sound understanding of suppliers’ lead times and disruption risks.
Companies also “need to make sourcing decisions in conjunction with strategy decisions for backup inventory of multiple suppliers”, BCG adds. “Critical materials should always be available from two or more sources to ensure that capacity is always available,” it advises.
4. Planning and inventory management.
Resilient companies plan with volatility in mind, says BCG. “They strategically deploy inventory, allocating their most critical materials and products to multiple locations to meet customer service levels while minimising inventory and storage levels.
It adds: “By integrating resilience considerations into short-term sales and operations execution as well as long-term sales and operations planning, organisations are better equipped to balance cost, risk, and working capital.
"Product and Engineering Flexibility. Organisations should develop resilient products by building flexibility into the design specifications and by using standardised or off-the-shelf components wherever possible.
"This approach enables easier substitutions and access to a larger pool of capable suppliers or manufacturing locations. Companies should also develop a robust design-change process so that substitutions and deviations from the original design can be evaluated and adapted on an as-needed basis."
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