Most corporate survival strategies are crafted to help businesses withstand any number of unanticipated supply chain disruptions. But how many are poised to profit from times of adversity?
The answer: not many.
The idea of deriving value from uncertainty, as opposed to merely weathering it, was formulated by Nassim Nicholas Taleb in his 2012 New York Times bestseller Antifragile: Things That Gain From Disorder. Now, Gartner is applying that concept to the supply chain.
The results aren’t encouraging. In a Gartner survey of 164 supply chain professionals, conducted in June, 2023, just 9% of respondents said they expected to gain revenue — making them “antifragile” — due to uncertainty. Twenty-eight percent anticipated no gain or loss, while 63% expected a revenue loss.
“Rather than trying to keep uncertainty out of the supply chain, antifragile supply chains embrace uncertainty with the objective of learning, evolving and adapting their capabilities based on their improved knowledge of it,” - Tim Payne, vice president analyst in Gartner’s Supply Chain Practice.
Gartner’s initial research into the topic uncovered deep anxiety about the future among supply chain professionals. “Eighty-eight percent expected their supply chains to be in a prolonged VUCA [volatility, uncertainty, complexity and ambiguity] environment,” Payne says. But that level of awareness doesn’t necessarily translate into constructive planning. On the contrary, he says, the supply chains of many companies continue to exist in a fragile state. “They’re really bad at managing uncertainty.”
Gartner polled supply chain executives about their current practices for ensuring resilience, as well as those they expect to be adopting in the next two years, with a particular emphasis on digital transformation of processes. Respondents were asked to consider their exposure from three perspectives: their level of variability and uncertainty, how much of their supply chains were likely to be affected by it, and how long they expected that exposure to last.
Payne says Gartner wasn’t surprised to find nearly two-thirds of companies operating in a fragile state. The reason, he adds, lies with common practices that are “inherently” fragile, in key areas such as sales and operations planning (S&OP) and decision-making.
Faced with the prospect of uncertainty, most companies strive to keep it outside their supply chains. They overinvest in systems and tools that supposedly ensure accuracy and stability in day-to-day operations.
“Those are not doable within the environment we are operating in at the moment,” - Tim Payne
Instead, businesses should be acknowledging the inevitability of disruption, and building up their knowledge of its impact.
Embracing uncertainty means “not trying to predict the hell out of it and get precision,” Payne says. Instead, businesses should be viewing their supply chains “through the lens of probability,” and be ready to adjust the forecast in line with actual events.
In the aftermath of the COVID-19 pandemic and other disruptions of recent years, businesses are rushing to adopt control towers, command centers and similar applications that encourage the centralization of data and global supply chain management. (Nucleus has spoken about this here)
What’s lacking in those tools, Payne says, is the ability to manage uncertainty. For all the data that’s generated and analyzed by modern-day technology, “if you’re fragile, you’ve got no knowledge of the impact on your supply chain because you keep it at arm’s length. You don’t do anything to quantify it.”
In some cases, Gartner uncovered examples of companies that were “unintentionally” antifragile because they were allowing for a degree of local autonomy throughout the organization. Ironically, those same companies were planning in the coming years to reverse that structure and centralize control over decision-making.
“That’s fragile behavior. The antifragile version is to get the right balance for how you want to use resources, and allow for the right amount of decision-making locally.” - Tim Payne
Based on its latest research, Gartner identifies six capabilities that characterize antifragile supply chains in times of uncertainty:
Enabling “dynamic” decision-making;
Accurately calculating the return on investment from supply chain systems at different times;
Assessing supply chain resilience through constant experimentation and stress testing;
Viewing redundancies in areas such as inventory, capacity and suppliers as an investment opportunity rather than a burden;
Incorporating probabilities, options and thresholds in end-to-end planning, both for the short and middle term, and
Taking an “arm’s-length” approach to overseeing and adjusting decision-making at the local level, intervening “only if policies are breached.”
When it comes to achieving true antifragility, even the best-managed supply chains have work to do. “It’s hard to find anybody that’s fully antifragile,” Payne says. “It’s a matter of degrees.”
What’s needed, he suggests, is a completely new mindset for supply chain executives. “If you’re fragile, it’s because you don’t have knowledge of uncertainty. It hides opportunities. Whereas if you’re antifragile, it exposes opportunities.”
Source: Supplychainbrain
Comments