How Do Companies Overcome Modern Supply Chain Challenges?

Three years ago, I watched a procurement manager literally draw a supply chain map on a whiteboard that looked like a spider web designed by someone having a seizure. Lines crossed everywhere. The suppliers related to sub-suppliers related to manufacturers, etc., had no idea where some of those lines led to.

That is what most companies are struggling with at the moment. The clean, straight supply chains that we diagrammed back at business school? Those are as outdated as a rotary phone in a smartphone world.

Why visibility isn’t enough anymore

Supply chain visibility is an opiate that everyone gives as preaching. Oh, we would be okay, we would see everything! They preach with vast religion.

However, in reality, is it even beneficial in cases where you can see the freight train coming your way, but you can not get off the tracks?

An example of an actual manufacturing company that I am familiar with has real-time visibility of 90 percent of its twisted supply network. They can know precisely when a shortage will occur, the number of units to be short, and which customers will be short-changed. They continue to find themselves on the wrong foot now and again, since it is one thing to see the problem and another thing to solve it. Which makes sense, actually.

The calculation becomes all different when you reach a point where you can see without being agile; it is nothing but costly anxiety.

The whack-a-mole problem nobody talks about

This is what actually takes place when an essential element disappears into the wind. You correct the shortage that is present now by seeking another supplier. Brilliant. Two weeks after that, that other supplier also gets short of supply due to guess what? They were also being used by half the industry as their fallback.

It is as though you were trying to use your fingers to seal the leaks of a dam as the water pressure continues to reach its goal. Each solution breeds two more problems.

The fact is that the companies that, in reality, succeed in this mess are not the ones with the most advanced forecasting algorithms (although it helps). They are the ones who decided to end the jigsaw puzzle, thinking of supply chain management as having a single solution.

The art of strategic redundancy

Intelligent organizations are developing what I term as productive paranoia into their business processes. Not the useless type where you hoard all the things like a doomsday prepper. The strategic kind.

Consider electronics sourcing, and this is really of interest to me. The traditional way was to find the lowest supplier and be on that ride until something dramatically fails. Now? Companies have dedicated sourcing partners that have relationships with many suppliers, forming a sort of insurance policy against interruption. Visibility also matters at the production level, where a machine vision camera on the line can catch defects and component issues early, reducing the volume of faulty output that creates downstream supply chain pressure. Fusion Worldwide represents this approach in electronics, maintaining deep supplier networks that most individual companies could never build themselves.

The counterintuitive aspect that leaves everyone off balance is that redundancy does not only concern the presence of backup suppliers. It is dealing with contingency plans.

Other firms are reengineering the products to employ more everyday parts. Others are also re-capturing some manufacturing processes through in-sourcing, but this poses its own set of challenges. Some of the braver are re-inventing their business models to be less reliant on intricate international supply chains.

Not without risk, of course.

Getting comfortable with controlled chaos

What truly infuriates me about the way the majority of companies are tackling the issue of supply chain: they are still attempting to eradicate uncertainty as opposed to learning to operate in its environment.

Most adaptive companies are not those that have the most inflexible processes or have the most detailed contingency plans. It is they who put the controlled flexibility into it all. Their contracts are more optionable, their inventory policies are based on disruption and not steady state, and their teams are trained to make decisions with incomplete information.

And about teams… (it is at this point to which I would like to revert to a point which continues to nag me)

The human element everyone forgets

The entire supply chain argument focuses on technology, yet a very human factor is the one that actually makes the difference. At 2 AM, when you are faced with a critical shortage, it is not your ERP system that magically locates your emergency inventory. The supplier relationship manager is the one who has built personal relationships, he/she has the personal contact cell phone number to use and the goodwill to do so.

It reminded me a lot of the tangled systems I recently read about on TechPount’s modern operations insight, where chaotic workflows expose just how fragile most business structures truly are.

I have seen firms endure such colossal upheavals just because the procurement team in these companies would take coffee with suppliers regularly as opposed to treating them like an interchangeable part in some cosmic vending machine.

The currency of those relationships is created in a crisis. Hard currency.

Well, I would like to have a beautiful 5-step solution to the contemporary supply chain issues, a dream of a process optimization that a management consulting firm would implement. There isn’t. But there is one that is practical: cease making an attempt to foretell the future with a crystal clearness and commence creating structures that can spin quickly when the future suddenly strikes you.

The spider web chain of supply is here to stay. And yet you can learn to go through it without being sucked up in yourself. However, sometimes it is not staying out of the chaotic situation; it is learning how to dance with it to a large extent, even when the music keeps shifting in the middle of the song.