November 2, 2022 | Written by: Simon Ellis
Categorized: Supply chain | Supply Chain readiness
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Managing a complex supply chain is challenging at the best of times. Since 2020, the coinciding forces of the COVID-19 pandemic, geopolitical turmoil, and trade conflicts have caused unprecedented disruption to global supply chains, underscoring the need for proactive approaches and clear plans to mitigate risk and improve resiliency. Supply chain resiliency is characterized by the ability to see what is happening (visibility), quickly analyze those events or data (intelligence) and to respond appropriately (agility).
The IDC conducted two surveys in 2022 to assess the challenges facing supply chains. The Worldwide Supply Chain Survey focused on the impact of supply chain disruptions and the steps companies are taking (or plan to take) to address those challenges. The IDC Supply Chain Resiliency Benchmark survey was specifically focused on assessing the levels of supply chain resiliency across a broad range of organizations.
Modern digital technology remains the top driver of transformation in the supply chain, though respondents cited a lack of clarity into its full potential. A lack of digital competency limits their ability to adopt new business models.
Supply chain transformation remains sluggish, with half of respondent companies still in the early stages of resiliency maturity. This report defines the elements of resilience and how organizations plan to improve them.
Supply chain challenges and mitigation
Increased costs and delays continue to significantly impact supply chains, with almost two-thirds experiencing effects. Transportation delays and price increases have been particularly problematic. Increases in costs to suppliers impact business customers and end consumers through rising prices.
Survey respondents cited supply diversification as their top approach to mitigating disruptions. Although some companies are talking about prioritizing local supply over global supply, there are significant limitations to this approach in the short to medium term.
Most companies are assessing supply to ensure that it is diversified across countries and regions. Some companies have reported that they are looking to R&D for more flexible design-to-availability product designs.
Managing risk with resiliency
Respondents’ top supply chain priority is now improving agility. As visibility has become more developed, the ability to act on observed supply chain problems is critical.
Supply chain resiliency means intelligently combining the capabilities of visibility and agility. Resilient supply chains use integrated, cloud-based applications, provide actionable orchestration with control towers and are collaborative across functions and organizations. They leverage AI and advanced analytics, offer a comprehensive view of supply and demand risks and provide crisis management resources.
Technical landscape and plans
Supply chain systems tend to be a mix of multiple vendors on-premises and in the cloud. 79% of technologies are on-premises or hosted, while 21% are SaaS. Scalable analytics, cloud platforms, applications and networks and AI were cited as critical technologies for the next one to three years.
Half of those surveyed said they were taking steps to mitigate risk through business process automation, cloud networks, ecosystems and applications and control towers and orchestration.
Key elements of resiliency
The report identified four key questions organizations should ask to evaluate their supply chain resiliency.
Visibility and risk assessment. How vulnerable is the supply chain to internal or external disruptions? Are you able to see them as they develop in real time?
Intelligence/data analysis. Is your system capable of quickly turning massive amounts of visibility and operational data into focused, actionable insights?
Agility, disruption mitigation, response planning. Assess the supply chain for readiness. Do you have the operational capability to effectively manage disruptions and communicate status?
Agility/disruption response execution. Is there an actual response performance plan for both mitigation and responsiveness?
Read the full report for the responsibilities of various functional departments in improving resiliency.
Stages of maturity
We identify five stages of maturity in supply chain resiliency, each of which enables a higher form of engagement with challenges and opportunities.
- Resistant (ad hoc)
Focused on functional metrics and performance without consideration for the digital tools or key processes to identify, anticipate or effectively respond to disruption.
- Reactive (opportunistic)
Some adoption of digital tools, but siloed and sporadic and poorly linked to key business processes, resulting in limited identification or anticipation of disruption.
- Responsive (repeatable)
A range of digital tools are in place, and the beginnings of supply chain resiliency are established, but capabilities remain disconnected from key processes and disruption response is modest.
- Predictive (managed)
Digital tools are well established and effectively connected to key processes, resulting in good capabilities to identify, anticipate and manage disruptions proactively.
- Prescient (optimized)
A digitally enabled, “thinking” supply chain can easily and comprehensively identify and anticipate disruptions and either mitigate them ahead of time or be prepared to react quickly when they occur.
Most organizations are in the earlier stages of maturity. A full 46% are resistant or reactive, and 32% are responsive. Just 22% of organizations are in the proactive stages, with 16% predictive and just 6% prescient.
See the full report for maturity by region, full dimensions of the maturity framework, and classification into “survivors” and “thrivers.” Survivors apply limited efforts to achieving supply chain resiliency, while thrivers optimize their supply chain to drive transformation and gain competitive advantage.
Implications for supply chain resiliency
Advanced supply chain resiliency can be a competitive advantage. Being organizationally poised to respond quickly to disruption allows businesses to seize new opportunities, gain market share and shape the market as a leader.
The majority of end-user companies share the responsibility for supply chain resiliency across multiple functions and business processes. This very fragmented nature results in many businesses having a less mature and effective approach to resiliency. The result is that most companies do not have a mature level of supply chain resiliency and thus are vulnerable to disruptions.
A resilient supply chain future
The report identified five characteristics of resilience.
Data through analytics to action. Supply chains must be able to quickly turn data into actionable insights to be resilient.
Resilient to both internal and external disruptions. To be resilient, a supply chain must be able to assess the impact of disruptions that occur both with the supply chain, and in the broader external environment.
Collaborative at scale. As suppliers, contract manufacturers and resellers increase in number, a resilient supply chain must have scalable collaboration capabilities.
Predictive/prescient where possible. The supply chain has already taken the appropriate steps or put triggerable mitigation plans in anticipation of a disruption.
Fast where not possible. Where disruptions cannot be anticipated, a resilient supply chain is poised to move quickly should an event occur.
It is past time for supply chains to take a structured, proactive stance against disruption risk. Whether it be another disease outbreak, the next war, further trade conflicts or weather disruptions due to climate change, your supply chain is going to be affected. Don’t just work on alternative plans, although that is a good start; develop the structural capabilities of a resilient supply chain.
Be clear and dispassionate about what went wrong or right in 2020 and 2021. Where were the cracks? Were problems caused by supply, demand, inventory or something else? What technology or process areas failed and how can you bolster them?
If you have not pursued end-to-end visibility, now is the time to start. If you have been working on visibility into parts of your supply chain, now is the time to connect those efforts. Assess the agility of your supply chain. Are you overly dependent on one part of the world or one key supplier?
Revisit, modernize and create local as well as global supply chain contingency plans. Leverage the full span of digitized tools, including modern robotics, drones and automated vehicles integrated with intelligent operational systems as part of flexible, dynamic workflows.
Take a platform approach to building supply chain capabilities, cadence and resiliency. Meeting short-term efficiency gains may be doable with one-off implementations, but long-term preparedness is unlikely without foundational digital capabilities.
Read the full IDC InfoBrief, Progressing Supply Chain Resiliency, sponsored by IBM »
About the analyst: Simon Ellis, Program Vice President, Manufacturing Insights, Supply Chain Strategies, IDC
Simon is responsible for providing research, analysis and guidance on key business and IT issues for manufacturers. He currently leads the supply chain strategies practices at IDC Manufacturing Insights, providing research and analysis on best practices and the use of information technology to assist clients in improving their capabilities in critical process areas.