Responding to Supply Chain Uncertainty with Intelligent Planning
Supply chain disruptions are anything but uncommon. 2018 saw 2,629 disruption events being reported.[i] In 2019, 51.9% of firms experienced supply chain disruptions, with 10% experiencing six or more disruptions.[ii] Largely, these were man-made (79%). Most had a low severity (63%). Over time it has become evident that the ability of organizations to negotiate medium to high disruptions (37%) is low. In 2019, the impact of this inability was a loss of € 100 M for 1 in 20 organizations, with the average annual cost of disruption being € 10.5 M.[iii] Significantly, on average it took organizations 28 weeks to recover from the disruption.[iv] The numbers don’t reveal the entire picture. But in themselves, they indicate a lack of resilience and an urgent need for organizations to predict, assess and mitigate disruptions with greater agility.
The real picture is that the cost of disruption is being under-reported. For many organizations the ability to accurately compute the cost of response, opportunity cost, and reputational damage are absent. The gaps in capability go beyond this. While most organizations can negotiate minor disruptions through safety stocks and long-term contracts, it is disruptions with higher severity and frequency that present overwhelming challenges. These gaps can be bridged by:
The only way to beat today’s volatility and unpredictability are to bring speed and agility through connected, real-time systems. Organizations take days to realize they have been hit by disruption, board room discussion on risk assessment, and to formulate management strategy run into another handful of days (see Figure 1 for the net saving in response time that can be achieved between traditional and agile responses to disruption). All the while the organization is bleeding, losing business, customers, and reputation. Reducing the response time from 28 weeks to 16 weeks is the essence of building resilience in supply chain planning.
Modern technology can help crash time-to-respond by almost 60%, enabling faster risk simulation and helping prepare an optimal response. This is easier said than done. Most organizations are stumped by the roadblocks they face to resilience. Bob Debicki, Senior Director, CPG & Retail, Anaplan, says that “Organizations are ill-equipped to handle disruption.” Debicki observes that only 22.6% of organizations use technology to map full tier-n networks. This means there is a severe lack of visibility into what is happening within supply chains. 73% of organizations still rely on spreadsheets to manage supply chain risks, indicating that applying intelligent technology can make a dramatic change and build resilience. Organizations can change their approach by building:
But many businesses are getting comfortable with the existing baseline for forecasting.
