Supplying perspective on supply chain resilience
With so much attention focused on supply chains, it makes sense to think more deeply about how supply chain stability should be evaluated. Supply chain resilience has traditionally been looked at in terms of an organization or a relationship between supplier and purchaser. But in a recent essay, the researchers argue for a more holistic view of supply chain.
Disruptions due to COVID-19 have put supply chains front and center in the minds of business leaders. Suddenly, everyone is asking, how reliable is our supply chain? And what do we need to do to shore it up? Kevin Dooley, Distinguished Professor of Supply Chain Management, says he and his supply chain management colleagues “are being inundated with requests to talk about COVID-19 and the supply chain.”
But these days, interest in supply chains stretches beyond business strategists to consumers. “A large retailer told us they have had more requests than ever from customers: Where is my food coming from?” Dooley reports.
This is in part due to supply disruptions — concern over the availability of staples we’ve taken for granted like toilet paper supply have a way of grabbing our attention. But it’s also because people care more about sustainably sourced products. This may be driven by a question about social justice, such as whether child labor is involved in production. Or it may be about concern over the consumer’s safety. “There are all kinds of products — such as children’s wear and maternity clothing — that people want to know if they will expose them to unsafe chemicals,” says Dooley.
With so much attention focused on supply chains, it makes sense to think more deeply about how supply chain stability should be evaluated. Supply chain resilience has traditionally been looked at in terms of an organization or a relationship between supplier and purchaser. But in a recent essay, titled Whose resilience matters? Addressing issues of scale in supply chain resilience, Dooley and his co-authors argue for a more holistic view of supply chain.
This comprehensive perspective considers supply chain not just as a limited arrangement between a buyer and sellers, but as an intricate network, or complex adaptive system. To truly bolster such a system, one needs to take a broader, more inclusive approach.
Factoring the full impact of a missing link in the chain
Dooley cites the loss of a paint factory in Japan, knocked out by the same tsunami that caused the Fukashima nuclear reactor disaster in 2011. The factory, owned by a German chemical company, happened to be the only plant in the world that produced a pigment called Xirallic. Xirallic is the metallic, glittering paint favored by carmakers including Ford, Volkswagen, Toyota, and GM. Little did they realize that Xirallic was only available from this single source. When the factory went offline, the production of thousands of cars went on hold at massive expense.
“The factory was either too far upstream for company executives to know about, or maybe the knowledge was considered proprietary to one of the companies,” says Dooley. “It took them over a year to recover.”
This is why Dooley suggests we need to think in more collective ways that will allow organizations and industries to better understand their supply chains and prioritize which matter most. This may lead to realizations for some sectors that they need to invest more in supply chain resilience than others.
Many industries are currently bogged down by the shortage of electronic chips. The auto industry, again, is one of the most affected, as are consumer electronic goods and other sectors. Yet, Dooley notes, “Everyone did what they should have from a supply chain 101 perspective.” This is why a deeper and more collaborative approach is needed.
“It’s about recognizing that you’re part of a bigger business community,” Dooley says.
Yes, some of the critical elements in supply chains are direct customers or suppliers. But there are a lot of other companies in that ecosystem that are important to your resilience as well.
It takes a team
How can companies take a more holistic approach to their supply chain resilience? In part, it may require teaming up with other organizations. Trade organizations can be “a great first step,” says Dooley, “to see what your industry thinks is most important.”
But that’s only a first step because you may have to work across industries to gain the resilience you need. As an example, Dooley points to a group of companies working on making their small-format packaging more sustainable. “They could be food companies or pharmaceuticals, but they share a commitment to recyclability.”
For companies that use small-format packaging, their immediate supply chain may include paper or plastic manufacturers. But their sustainability supply chain includes waste management companies, recycling plants, and municipalities. Companies from totally different industries, who don’t usually talk to each other, may find it very beneficial to collaborate. That’s why several of them joined together to provide low-interest loans to cities to develop recycling infrastructure. It’s something companies couldn’t do on their own.
The catch is that possible collaborators might also be competitors. Some companies may view their supply chain visibility as a competitive advantage. “Let’s say you’re sourcing some crop in a particular region,” Dooley says, “and you can invest heavily in weather monitoring and your competitors can’t. If you sense volatility that could affect supply, do you share that intel or keep it private?”
Keeping that kind of information private would be based on a win-lose assumption, even though competitors were facing the same risk. But in the long run, if that crop fails, everyone loses.
Despite rivalries in the marketplace, Dooley and his colleagues see the trend toward more collaborative approaches growing. To truly secure supply chain resilience in today’s interconnected business environment requires the cooperation of a wide range of players, even if that means including nontraditional partners and competitors.
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