Moving towards the adaptable supply chain of the future

It’s a tough time to be a supply chain manager. For a profession that craves control and certainty, the level of disruption and uncertainty must be at near intolerable levels. No sooner has one crisis been dealt with and digested than another arises. A global pandemic, the biggest conflict in Europe since the second World War, the Suez Canal blocked by a grounded cargo ship, the war in Gaza, Red Sea trade disrupted by Houthi attacks, the Panama Canal in danger of drying up – add climate-change-driven extreme weather events and heightened geopolitical tensions across the globe and you have a recipe for near chaos.

According to UCD professor of sustainable supply chain management Mark Pagell, supply chain professionals have spent much of the past 30 years trying to remove uncertainty and increase control over every aspect of the supply chain. This worked well until Covid.

“People were surprised when something didn’t turn up on time,” he notes. “They had almost forgotten how to deal with disruption. Now a lot of companies are still suffering from the Covid hangover. They over ordered a lot of inventory that’s still sitting around and no one wants.”

This makes current disruptions even harder to deal with and there is no real sign of stability returning any time soon. According to the latest PwC Global Supply Survey, more than 60 per cent of companies are highly concerned about supply chain disruption in the short term and expect this to continue through to 2030.

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The survey also finds that 12 per cent of companies have fully adapted their supply chains to be more resilient, while 87 per cent remain in the transition phase, including 51 per cent with initiatives under way and 36 per cent with initiatives planned.

“For companies impacted by the current crises the immediate focus is on contingency planning,” says Mark McKeever, procurement and supply chain director with PwC Ireland. “As part of this, the initial key priority is on getting visibility of stock – both in terms of inbound raw materials and finished goods.”

Armed with data on what they themselves and their suppliers have to hand, “companies can then determine how best to allocate and manage stock”, he adds.

Technology has a role to play. “Whilst we are seeing evidence that supply chains are developing mechanisms to cater for disruptions, there is still more to be done as the situation continues to evolve,” says Neal Johnston, business consulting, supply chain and operations partner at EY.

“Leveraging technology to improve visibility throughout the supply chain is a key tool in reducing risk. It is a vital means of adding visibility and supporting speedier, more accurate management decision making. There is a myriad of technology offerings available across the supply chain, suitable for all industries which can integrate seamlessly with existing systems to deliver this enhanced visibility.

“Improving your supply chain’s ability to make better decisions through end-to-end visibility is paramount in mitigating risk from events such as the crisis in the Red Sea and the Baltimore bridge collapse.”

McKeever agrees saying that companies are deploying new digital tools, specifically control towers and advanced planning tools, to enhance visibility and control of product movements across their end-to-end supply chains.

The are also assessing opportunities to redesign their supply chain network, he adds. “For example, they are shifting some or all production to new regions, deploying backup facilities, diversifying suppliers and moving dual sourcing. This is likely to add additional cost; however, this needs to be balanced against a more responsive and resilient supply chain.”

“If you don’t have the stuff, it doesn’t matter what it costs,” Pagell observes somewhat wryly.

Increased collaboration is another remedy being applied. “Our survey shows companies are working more productively and collaboratively with stakeholders to address shared challenges and promote economic growth,” says McKeever. “A third of the industry leaders identified in the survey are participating in fully integrated supply chain ecosystems which provide a more seamless, transparent and efficient way for stakeholders to share information, collaborate across entire value chains and react faster to problems. We see competition growing between these ecosystems as companies clamour to join them.”

Resilience has become something of a catch cry in the supply chain sphere in recent years but Pagell is not so sure this should be the goal.

“In supply chains and engineering the definition of resilience is the ability to return to the state you were in before the disruption,” he notes. “That is not the case in nature. Nature doesn’t return to its original state – it adapts. An adaptable supply chain would be different after disruption. I don’t think the old definition of resilience will hack it in the new world.”

Pagell points to an interesting example of adaptation using technology. “The Norwegian state oil company couldn’t get parts during Covid and started 3D printing them. It was a bit more expensive but they were able to get rid of inventory. They looked to see if others needed the service. They are building an ecosystem of customers in the fishing and oil industries to sell parts to. This is built on highly skilled labour and cutting-edge technology. This is an example of organisations teaming up to solve a problem.”

This kind of adaptability will be increasingly important in future as climate change causes long term disruptions.

“If it starts raining again there might be no harvest this year,” Pagell notes. “A 100-year flood is becoming a five-year flood and may soon be more frequent than that. It might take a long time but countries like Ireland could be seen as an uncertain source of supply and companies will look for alternatives. That’s the next crisis. It will be like a slow motion Covid.”

But while the supply chain manager’s lot may not be a happy one at the moment, their skills will command a premium as demand for them grows.

“Demand for supply chain professionals is way up and the supply doesn’t match it,” Pagell points out. “If you know you are going to need a lot of people in the supply chain function in future and that you are going to be doing things differently, extra hiring now of young people with fresh thinking might make a big difference.”