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Over the past few years, supply chains have been disrupted for reasons ranging from trade wars and Brexit, to the semiconductor shortage and the coronavirus pandemic, to the Russian invasion of Ukraine and global inflation. Labor shortages and supply constraints are also impacting operations, but they still only begin to round out the complete list of challenges that chief procurement officers (CPOs) are dealing with right now.
The long-term nature of these events is taking a toll on CPOs who must tackle the day-to-day while also planning and strategizing for the future. According to a new Gartner report, the latest series of disruptions and the growing reach of external shocks are forcing companies to reassess their focus on resilience as a core competitive advantage.
Of course, resilience is becoming more elusive in the modern supply chain environment. Defined by Gartner as an organization’s ability to “avoid or absorb the business impact of major disruptions through a risk-balanced approach to product design, supply chain strategy and network design,” resilience is a buzzword that few (if any) procurement departments can afford to ignore in today’s marketplace.
“Achieving a resilient supply chain that maintains the ability to execute and thrive under stress will be impacted by how well the CPO achieves alignment across business peers in the executive suite,” Gartner points out in its new Shockproof Your Supply Chain for the New Age of Disruption report, “and their ability to synthesize digital and physical business worlds.”
Key Findings
In the report, Gartner also says that:
- Chief procurement officers (CPOs) have been beset by one disruption after another over the past two years, without much time to recover from any of them.
- As a result, their ability to respond effectively has been depleted, the cost of recovery is constantly increasing and their focus is misdirected by concentrating on solving the most immediate and simplest issues time and again.
- As risks arise more frequently and with wider reach and urgency, CPOs are often unable to learn from past issues to effectively plan, implement or execute any lessons learned holistically to prevent future disruptions causing similar issues.
- Amid continual disruptions, CPOs can’t devise long-term strategies for dealing with a disruptive world.
Chief procurement officers are also doing a lot more firefighting these days, which leaves little or no time for strategic planning and longer-term problem solving. It also precludes them from thinking beyond procurement to “envision products and innovations that can be manufactured despite disruption, and contemplate investment in processes providing a competitive edge,” Gartner adds.
Seeing the Bigger Picture
In the midst of the current chaos, there are steps that CPOs can take to not only mitigate their current challenges but also turn an eye to the future and start planning for it. So while they’re reacting to threats and disruptions, for example, they can also take a “bigger picture” look at their supply chain operations, collaborate with other stakeholders and develop solutions that impact the whole enterprise—from design to fulfillment, and the reverse.
Gartner points to Operation Warp Speed as a good example of this approach in action. In 2020, a vaccine development and approval process that would normally take years was executed within months without sacrificing quality, safety or cost.
“This framework also applies in war, financial crises, famine, energy crises and so on,” Gartner says, “in which a company or government must respond at a rate that at least matches the threat or a best case outpaces the crisis impact.”
3 Steps to Take Now
To CPOs who want to ensure that their supply chains remain both operational and competitive despite the constant disruptions being put in front of them, Gartner suggests these starting points:
- Manage and mitigate risks beyond just the impacted area, by taking a view of future fragilities across the entire organization. “Business areas not affected should also be evaluated and adjusted because unexpected developments could turn into vulnerabilities,” the research firm says.
- Turn all disruption and response lessons into preventive measures designed to improve risk management’s response to future disruptions. “Connect supply chain risk management to business continuity management,” Gartner advises, “and regularly review and test business continuity plans when risk management responses fail.”
- Use emerging technologies and digital business platforms to augment operational excellence. “Adopt a practice of exponential investment,” it concludes. “This creates an outside-in supply ecosystem that helps organizations create their own markets and robust demand with innovation.”
