November 2, 2022 | Written by Simon Ellis
Categorized: Supply Chain | Supply Chain Readiness
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Managing a complex supply chain is challenging at the best of times. Since 2020, the combined forces of the COVID-19 pandemic, geopolitical turmoil and trade tensions have resulted in unprecedented disruptions to global supply chains, underscoring the need for proactive approaches and clear plans to mitigate risk and improve resilience. Supply chain resilience is characterized by the ability to see what is happening (visibility), quickly analyze those events or data (intelligence), and respond appropriately (agility).
The IDC conducted two surveys in 2022 to assess supply chain challenges. The Worldwide Supply Chain Survey focused on the impact of supply chain disruptions and the steps companies are taking (or planning to take) to address these challenges. The IDC Supply Chain Resiliency Benchmark survey specifically focused on assessing supply chain resilience across a broad spectrum of organizations.
Modern digital technology remains the key driver of supply chain transformation, although respondents cited a lack of clarity about its full potential. A lack of digital literacy limits their ability to adopt new business models.
Supply chain transformation remains sluggish, with half of the organizations surveyed still in the early stages of resilience maturity. This report defines the elements of resilience and how organizations aim to improve it.
Supply chain challenges and mitigation
Increased costs and delays continue to significantly impact supply chains, with nearly two-thirds affected. Transport delays and price increases were particularly problematic. Cost increases at suppliers affect business customers and end consumers through rising prices.
Respondents cited supply diversification as their top approach to mitigating disruption. Although some companies are talking about preferring local supply to global supply, there are significant limitations to this approach in the short to medium term.
Most companies review the offering to ensure it is diversified across countries and regions. Some companies have reported that they are researching and developing more flexible product designs from design to availability.
Risk management with resilience
The top priority for respondents in the supply chain is now improving agility. As transparency has evolved, the ability to act on observed supply chain issues is critical.
Supply chain resilience means intelligently combining the capabilities of transparency and agility. Resilient supply chains use integrated, cloud-based applications, provide actionable orchestration with control towers, and collaborate across functions and organizations. They leverage AI and advanced analytics, provide a comprehensive view of supply and demand risks, and provide resources for crisis management.
Technical landscape and plans
Supply chain systems are typically a mix of multiple vendors on-premises and in the cloud. 79% of technologies are on-premises or hosted, while 21% are SaaS. Scalable analytics, cloud platforms, applications and networks, and AI were named as critical technologies for the next one to three years.
Half of respondents said they are taking action to mitigate risk through business process automation, cloud networks, ecosystems and applications, and control towers and orchestration.
Key Elements of Resilience
The report identified four key questions companies should ask to assess the resilience of their supply chain.
Visibility and risk assessment. How vulnerable is the supply chain to internal or external disruptions? Can you follow their development in real time?
Intelligence/Data Analysis. Is your system capable of quickly turning massive amounts of visibility and operational data into focused, actionable insights?
Agility, Incident Mitigation, Response Planning. Assess the supply chain for readiness. Do you have the operational capability to effectively manage disruptions and communicate status?
Agility/Break Response Execution. Is there an actual response performance plan for mitigation and responsiveness?
Read the full report on the responsibilities of different functional departments in improving resiliency.
stages of maturity
We identify five levels of maturity in supply chain resilience, each enabling a higher form of addressing challenges and opportunities.
- resist (against)
Focuses on functional metrics and performance without considering the digital tools or key processes to detect, anticipate, or effectively respond to disruptions. - Reactive (opportunistic)
Some adoption of digital tools, but isolated and sporadic and poorly connected to key business processes, resulting in limited disruption detection or anticipation. - Responsive (repeatable)
A range of digital tools are in place and the beginnings of supply chain resilience are in place, but capabilities remain disconnected from key processes and disruption response is modest. - Proactive (managed)
Digital tools are well established and linked effectively to key processes, resulting in good abilities to proactively identify, anticipate and manage disruptions. - Predictive (optimized)
A digitally-enabled, “thinking” supply chain can easily and comprehensively identify and anticipate disruptions and either mitigate them in advance or be prepared to respond quickly when they occur.
Most organizations are in the early stages of maturity. A full 46% are resistant or reactive and 32% are responsive. Only 22% of companies are in the proactive phase, with 16% being proactive and only 6% being proactive.
View the full report for maturity by region, full maturity framework dimensions, and survivor vs. thriving classification. Survivors expend limited effort to achieve supply chain resilience, while those who survive optimize their supply chain to drive transformation and gain competitive advantage.
Impact on supply chain resilience
Greater supply chain resilience can be a competitive advantage. The organizational readiness to react quickly to disruptions enables companies to seize new opportunities, gain market share and shape the market as a leader.
The majority of end-user organizations share responsibility for supply chain resilience across multiple functions and business processes. This highly fragmented nature results in many organizations having a less mature and less effective approach to resilience. The result is that most organizations do not have a mature level of supply chain resiliency and are therefore vulnerable to disruption.
A resilient supply chain of the future
The report identified five characteristics of resilience.
Data through analytics to action. Supply chains must be able to quickly turn data into actionable insights to be resilient.
Resistant to internal and external disturbances. To be resilient, a supply chain must be able to assess the impact of disruptions occurring both within the supply chain and in the wider external environment.
Large-scale collaboration. As the number of suppliers, contract manufacturers and resellers increases, a resilient supply chain must have scalable collaboration capabilities.
Forward-looking/predictive where possible. The supply chain has already taken the appropriate steps in anticipation of a disruption or established triggerable mitigation plans.
Fast where not possible. Where disruptions cannot be anticipated, a resilient supply chain is ready to move quickly should an event occur.
Essential Guidance
It’s time for supply chains to take a structured and proactive approach to disruption risk. Whether it’s another disease outbreak, the next war, more trade conflicts, or weather disruptions due to climate change, your supply chain will be affected. Don’t just work on alternate plans, although that’s a good start; Developing the structural capabilities of a resilient supply chain.
Be clear and dispassionate about what went wrong or right in 2020 and 2021. Where were the cracks? Were problems caused by supply, demand, inventory, or something else? Which technology or process areas have failed and how can you strengthen them?
If you haven’t already strived for end-to-end visibility, now is the time to start. If you’ve been working on gaining visibility into parts of your supply chain, now is the time to connect those efforts. Assess the agility of your supply chain. Are you too dependent on one part of the world or one major supplier?
Review, modernize and create local and global supply chain contingency plans. Leverage the full breadth of digitized tools, including modern robotics, drones, and automated vehicles, integrated with intelligent operating systems as part of flexible, dynamic workflows.
Use a platform approach to build supply chain capabilities, cadence and resiliency. Short-term efficiencies can be achieved with one-off implementations, but long-term readiness is unlikely without fundamental digital capabilities.
Read the full IDC InfoBrief, Progressing Supply Chain Resiliency, sponsored by IBM »
About the Analyst: Simon Ellis, Program Vice President, Manufacturing Insights, Supply Chain Strategies, IDC
Simon is responsible for providing manufacturers with research, analysis and guidance on key business and IT issues. He currently leads the supply chain strategy practices at IDC Manufacturing Insights, providing research and analysis on best practices and the use of information technology to help customers improve their capabilities in critical process areas.
