Why an obsession with risk management is here to stay

Risk Management

Two years since the onset of the pandemic, some of the major supply chain disruption has barely started to ease. Bastian Consulting and partners discuss the changing risk landscape and the key tools needed to navigate the challenges ahead.

The pandemic turned two decades of supply chain thinking on its head, and the industry is now finding itself having to rebuild, regroup and redesign for the uncertainty that lies ahead.

While some bottlenecks have started to ease, others are just beginning, and as a result we’re still seeing shortages affect consumers and businesses worldwide.

With this in mind, mitigating and managing risk is set to be the central theme for every successful supply chain operation in the next five years.

Changing mindsets

Tony Richter, Partner at Bastian Consulting says supply chain operations worldwide are shifting as a result of the fragility that was exposed by the pandemic.

“Up until the pandemic, supply chains operated a lowest cost centre possible model. Many businesses sourced raw materials as cheaply as possible and kept the lowest amount of inventory they could get away with – but this model is now well and truly broken,” Tony says.

Chris Buckthorp, Director of Professional Services at Manhattan Associates, a leading software provider, agrees and says Covid-19 has proven that supply chain operations as we know them now – are broken.

What all of this change and disruption has led to is a change in mindset. However, Bastian Consulting’s Tony Richter says with a new mindset comes a new way of working and this means a renewed emphasis on building meaningful relationships.

Moving forward there is set to be a major focus on ethical sourcing, transparency and improving supplier relationships. As when things get tough – businesses need to be able to lean on partners they can trust.

“Fostering meaningful collaborative relationships will be a key theme in mitigating risk. Not just from client and supplier perspective but cross-functional within a business as well,” Tony says.

 Managing disruption with technology

According to Manhattan’s Chris Buckthorp, technology is absolutely critical in simplifying complex operations. “When you try and manage risk with just human knowledge and experience you are not taking advantage of the full opportunities available to you,” he says.

Technology allows organisations to flex and adapt to a constantly changing environment. “We’ve been developing our software to be as agile as possible, so that our customers can turn capabilities on and off very quickly to meet changes in demand or changes in the environment,” Chris says.

According to Luke Wood, CEO and Co-Founder of Escavox, a fresh food tracking provider, supply chain leaders now need access to hard facts, because they can no longer rely on plans.

“We are starting to see more remote, sensor-based data being fed into operational decisions,” he says. Escavox provides independent and objective data on the performance of fresh food supply chains. In the food supply chain, disruption causes degradation and can have detrimental impact on profitability.

“Modern supply chains are the epitome of unsolvable problems. So, what we’re now learning to do is manage disruption with technology. The way to do this in the food supply chain is to get access to as much timely information as you can and ensure you have the smarts in place to process it,” he says.

Man and machine: driving productivity through collaboration

At present, we’re seeing the largest wave of investment into supply chain operations worldwide. As a result, the demand for skills in this area has never been higher.

“The supply chain recruitment space is a battlefield right now ­– there’s fierce competition for every role,” Tony says.

Therefore, Tony urges organisations to do everything they can to hold onto the talent they have. “All of your staff are being headhunted and approached right now, so when it comes to performance review, commissions, bonus and salary don’t wait until the last minute. When you have good people – do everything you can to keep them,” he says.

A significant part of the investment in supply chain operations at the moment is in mega facilities, which are largely automated. However, without the expertise required to run these facilities, businesses will fail to benefit from these investments.

“You need to have the know-how on the ground to get the true ROI and efficiency gains that these facilities can truly deliver,” Tony says.

Facing the future with confidence

While COVID-19 was the first black swan event to disrupt industry for a long time, it won’t be the last.

“COVID-19 showed us that shipping lines can fail, sources of supply can fail, and demand can change on a knives edge. The only way to deal with these competing problems is to become more agile and proactive so you can manage and mitigate those risks moving forward,” Luke Wood at Escavox says.

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