Survival of the Fittest: Is Your Supply Chain Ready for the Next Disruption?

Knowing that supply chain operators are working to realign their networks and prepare them for future disruptions right now, Gartner, Inc., says the organizations that focus on developing “fit for purpose” supply chains will be best positioned to take on any disruption that crosses their paths.

According to Gartner, “fit for purpose” describes an approach where planning leaders focus on what they should be doing, instead of benchmarking what others are doing, but may not necessarily work for them.

“Many supply chain planning leaders ask themselves if they should organize their function in a more centralized or decentralized way,” said Ken Chadwick, vice president analyst with the Gartner Supply Chain practice, in a press release. “To answer that question, they must first understand what their individual fit for purpose organization looks like.”

 

Focusing on Resilience

It doesn’t take a global pandemic to bring a supply chain to its knees. In fact, even short-term problems like factory fires, tornadoes, and floods can impact these end-to-end networks for months or even years. “Disruption is not a short-term situation, but a long-term trend that will most likely accelerate as we face climate change impacts, global power balance shifts, and more,” said Simon Bailey, senior director analyst with the Gartner Supply Chain practice, as reported in MH&L.

“In the future, disruptions will occur more frequently and supply chains must be able to deal with whatever is coming next,” he continued. “Some supply chain leaders have understood that already and prepared their organization accordingly.”

Gartner groups those well-prepared entities into the “fit” category. And where these fit supply chains can move ahead of the competition after dealing with the high-impact events like the global pandemic, the “fragile” supply chains tend to fall behind.

“Fragile supply chains find operationally focused disruptions — such as demand and supply shifts — to be most impactful,” MH&L reports. “While focusing on these operational challenges, they lose sight of their long-term goals and overlook how structural shifts could help them maximize the value and thus they fall behind the fit supply chains.”

To design a fit for purpose planning organization, Gartner says organizations must factor their business and operating models into the equation along with their operational mindsets.

Business and operating model: This is the first element of designing a fit for purpose planning organization, and it requires an understanding of the overall company’s business and operating model (e.g., customer base, products, serviced markets, etc.). Knowing the extent to which those factors are changing is also important. “Some companies are now moving from global to more regionalized supply networks because global networks are less resilient when it comes to disruptions, such as trade wars or the COVID-19 pandemic,” Chadwick said. “On the other hand, there are companies that want to try a more centralized approach to better serve their key customers.”

Operating mindset: Next, Gartner says to focus on what’s important to the company in terms of operations and decision making. Some companies’ mindsets focus on business unit accountability, it says, so they align planning to a commercial leader who owns those outcomes. Other companies are driving an end-to end mindset, leading to one integrated planning organization serving enterprise outcomes. Mindsets related to cost-focus, customer experience, innovation, agility, resilience, and risk also have a significant impact on how planning leaders organize, according to Gartner. “When planning,” Chadwick explained, “leaders know about their organization’s present and future operating model and mindset, they can in turn think about what their own function should look like to best fit in and serve its purpose.”

Based on these evaluations and the organization’s overall operating model, supply chain planning leaders can select the best network design, be it decentralized, center-led, or centralized in nature. In a decentralized model, for example, all planning roles report into the separate business unit leaders. The center-led model leaves planning operations within the business units, the research firm explains, but creates roles at a global level that focus on planning processes and long-term planning.

Finally, the centralized model finds all supply chain planning elements reporting to an integrated planning leader who runs all aspects of planning across the different regions.

“There really is no one-size-fits-all solution for a planning organization, nor is a decentralized model necessarily a sign of lesser maturity,” Chadwick said. “Planning leaders must evaluate their individual situation and future plans and design their function accordingly.”