Gartner: Reducing supply chain disruptions rely on CSCOs
Research by Gartner shows that companies that prepare for supply chain disruptions are likely to experience less than one-third of disruptions than their peers.
According to Gartner, chief supply chain officers (CSCOs) must strategically reduce the rate of supply chain disruptions by reducing their surface areas.
Gartner defines supply chain surface areas as the sum of all the products, processes and networks that compose the supply chain today and represent touchpoints that risk events can have with the supply chain.
“CSCOs should reduce the surface areas of their supply chains by simplifying processes, reducing movement within their supply chains, and reducing the number of sites and suppliers that compose their networks,” said Suzie Petrusic, director research with the Gartner Supply Chain practice.
“With a higher cadence of risk event, a smaller surface area is an asset, a large surface a major liability. CSCOs can’t control how many risk events will happen, but they can control the size of the target they want their organisation to be,” she said.
Supply chains are easy to disrupt because they pose a large target. They expanded over decades and dispersed risk across a global network, while optimising cost. Processes became more complex and required a lot of movement of goods and material within the supply chain, which is easy to disrupt.
Disruption-shaping organisations today have managed to control the surface areas of their supply chains by constraining the number of touchpoints risk events can have with their organisation. This means fewer 3PL providers, shipping modes and lanes as well as greater distances between suppliers, factories, warehouses and distribution centers. In short, processes are being redesigned and simplified.
Disruption Shapers Embed Disruption Awareness into the Supply Chain Strategy
For disruption shapers, reducing disruption is a part of the strategy planning process, considered along with cost, quality and speed. However, this does not mean abandoning the strategic business objectives of past decades. Instead, CSCOs can redefine cost optimisation by including the cost of constant disruption in their calculations.
“They must understand that the current environment will make it harder and harder to deliver reliable and profitable service to customers, and they should act now to experience less disruption later,” Petrusic said.
Benefits of Disruption Shaping
Disruption-shaping organisations benefit in multiple ways, such as reducing costs to the supply chain due to fewer disruptions experienced. The network is also more likely to be prepared for disruption and recovery will take less time.
“The biggest benefit of this approach is the competitive advantage it creates. Disruption shapers are ready and waiting to service the customers that their closest competitors are losing because they are too busy responding to risks,” Petrusic concluded.