FROM a business standpoint, the first 10 years of the 21st century have been anything but normal. Economic turmoil is almost constant. Currency valuations shift with the wind. Bank lending vacillates between lenient and tight-fisted. What many people are now saying, in fact, is that this state of volatility may actually be reinforced in 2012: a New Normal characterised by abnormal business conditions.
According to a recent Accenture survey, executives are acutely aware ― and quite concerned ― about this apparently ceaseless state of sudden changes and rapidly shifting paradigms. Seventy percent of the 3,000-plus decision makers we polled expressed dissatisfaction with their company’s ability to predict future performance. And more than 80 percent said they are worried about the resilience of their supply chains ― the ability to adapt operationally to rapid changes in products, markets and currencies.
As we embark on 2012, several global and regional circumstances foreshadow ongoing uncertainty and volatility. The economic instability in Europe could have ripple effects in the United States that may reverberate from the Western world into Asia Pacific. While companies monitor the situation and undertake contingency planning, they also have heightened awareness of the concerns associated with natural disasters, as evidenced by the recent flooding in several countries across the region.
The impact of this New Normal on companies’ supply chains is potentially huge. But what sort of changes should companies consider as a result? In our view, one of the best solutions is reinventing the supply chain as an adaptable, malleable ecosystem of processes, people, capital assets, technology and data.
Simply put, the “dynamic supply chain” we’re proposing facilitates maneuverability in unpredictable markets. This may sound like something companies have always wanted, but the reality is that few organisations have achieved true supply chain dynamism. Most reside somewhere between the functional excellence and integrated enterprise stages. They’ve made tremendous progress but the emerging state of permanent volatility demands more.
How necessary?
Can a typical company justify the changes needed to create a dynamic supply chain? Most likely, yes, because today’s state of permanent volatility can severely impede the operations of most organisations. Still, there are many questions companies can pose to help determine the intensity of their needs. For example, they can question their current level of adaptability. How nimbly does my supply chain organisation react to changing customer demands?” or “How strong is our ability to respond smoothly to major disruptions?”
Another evaluation perspective might be strategic value. Could my supply chain be positioned less as a cost centre and more as an enabler of key competitive capabilities? Lastly, companies might view the issue from a growth perspective. How prepared are we to operate in new or expanding global markets?
Addressing the above questions won’t produce a final decision, but it could shed more light on the game-changing shifts occurring in the global business community, as well as on supply chain solutions that help respond to those changes in a profitable and competitively advantageous way.
Better future of the supply chain dynamism in 2012
No two dynamic supply chains will be precisely alike, even among industries, geographies or business units within the same company. There is a common trait, however: speed to outcome within each functional domain. There are also at least five universal components of any dynamic supply chain for a better future.
First is an adaptive operating model. This is a living, breathing design geared to ensuring that supply chains align with growth and innovation strategies, and embrace processes and systems that help companies rapidly scale or shutter operations based on short-notice demand signals.
Secondly, new skills in risk anticipation and mitigation. “Speed of response” is a critical characteristic of dynamic supply chains, and one way to get it is with advanced risk-prediction and identification capabilities. Unfortunately, only 11 percent of the survey respondents actively manage supply chain risk and only 18 percent have formal supply chain risk management systems in place.
The third component is enhanced visibility and information acquisition. Maximising responsiveness and adaptability means you excel at gathering, analysing and applying information contributed by each link in the supply chain. Leveraging visibility and marshaling better information can also mean integrating your supply chain systems with pricing, promotion, sales and marketing applications.
Fourth is executional excellence. Companies focused on the development of dynamic supply chains don’t overlook the importance of investing in core business processes. And finally, supply chain sophistication and professionalism. It’s essential that the organisation as a whole understands all components of a dynamic supply chain strategy, and this means developing superior supply chain skills and ensuring that the entire company is receptive to new ways of operating.
[Olaf Schatteman is the managing director of Accenture Asia Pacific.]