Supply chain issues will cost consumer goods brands more than $800 billion in top-line growth over the next five years. At the heart of it, the problem is unpredictability. However, some experts suggest that unpredictability in the supply chain can be a force for increased revenue and strategic opportunity.
A hostile supply chain landscape
During the pandemic, global supply chains were exposed for just how fragile they had become. Hyper-globalised just-in-time organisation buckled overnight under the pressures of the COVID-19 pandemic. Since then, the supply chain sector has repositioned itself. Increasingly, supply chain leaders are seen as sources of resilience as they capture value and deliver wins despite disruptions.
However, the current economic landscape may be—as strange as it seems—more hostile than the climate of 2021. Today, supply chains are being placed under unsustainable pressure. This pressure originates from increasingly unpredictable customer buying behaviour, in addition to ongoing material shortages, and macroeconomic turbulence.
Supply chain problems aren’t being solved
“To thrive in this uncertainty, businesses must take control of their supply chains and deliver value. But despite valiant efforts, supply chain problems aren’t being solved,” a report by Celonis found recently.
The ripples of geopolitical conflict and climate-crisis-driven disruption continue to disrupt global supply chains, with no signs of going away. At the same time, economic pressures are growing more severe. In addition to a global slowdown, multiple post-industrial nations are teetering on the brink of (or already sliding into) recessions. The result is widespread uncertainty as to customer and consumer behaviour.
Is uncertainty a supply chain killer?
Traditionally, uncertainty is anathema to supply chain managers. In a 2023 Gartner survey of 164 supply chain executives, 63% predicted that supply chain uncertainty would lead to a loss.
Source: Gartner (November 2023)
Strangely, 9% of CSCOs believes that uncertainty would result in an increase in revenue. This data challenges (in a very small way) the assumption that uncertainty in the supply chain is a bad thing.
“The inability to cope with uncertainty is driven by a misallocation of initiatives to the wrong strategy,” asserts Tim Payne, Vice President Analyst in Gartner’s Supply Chain Practice. In many supply chains, he argues, processes and systems are set up to “keep keep uncertainty outside the supply chain.”
However, this is a world where uncertainty is the only state of existence that supply chain managers can count on. Under these circumstances, this methodology comes badly apart at the seams. “This overinvestment in a barrier to keep uncertainty out actually stifles the ability to learn from it, keeping most supply chains today in a fragile state,” Payne says.
Antifragility in the supply chain
The answer, according to Gartner’s experts, is cultivating an “anti-fragile” supply chain.
“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,” notes Payne. “An antifragile mindset changes how CSCOs approach and shape their capabilities, including in areas such as integrated planning, ROI calculations, supply chain redundancy and assessing uncertainty.”
According to Gartner’s research, several capabilities are useful in reducing the fragility of supply chains and increasing their potential to capitalise on uncertainty, rather than be disrupted by it.
The most impactful antifragile supply chain capabilities identified by Gartner include:
- Decision Processes and Collaboration. Organisations that enable dynamic decision processes during uncertainty were 4.9 times more likely to have a positive revenue impact.
- Calculating ROI for Supply Chain Investments. Those that accurately assess the value of investing at different times due to uncertainty saw a 4.5 times increase in positive revenue impact from uncertainty.
- Managing the Assessment of Uncertainty. Organisations that performed a high degree of experimentation on their supply chains to stress test them saw revenues increase 3.7 times due to uncertainty.
- Supply Chain Redundancy. Supply chain managers that viewed redundancy (whether from inventory, capacity, or multiple suppliers) as an investment opportunity rather than an inefficiency to be eliminated saw a 3.6 times revenue spike from uncertainty.
- Supply Chain Planning. Organisations with a focus on end-to-end planning policies in the midterm and accurate functional short-term planning saw revenues increase by 2.5 times.
- Monitoring, Adjustments and Responsiveness. Businesses that practised monitoring at “arm’s length” to intervene only if policies are breached and empower local stakeholders to adjust within policies saw a 2.1 times increase.
- People & Culture
- Risk & Resilience
