Business, Interrupted: Peeling Back the Layers of Supply Chain Resilience

 

If business resilience professionals have learned anything from the coronavirus pandemic, it’s that when it comes to our supply chain, it’s no longer about planning for what we do if a disruption happens, but how prepared we are to respond when it occurs, with more introspection on the role supply chain risks play in our abilities to achieve operational resilience.

In episode six of Castellan’s podcast, “Business, Interrupted,” we chatted with David Landsman, Senior Vice President and Head of Global Operations at JLL Technologies, about the changing threat landscape for our supply chains and the role third-parties play in our resilience management goals and successes.

The More Supply Chains Change, the Same Issues Pop Up

While the pandemic certainly has shone a light on supply chain resilience issues, it’s not a new problem for the industry. Unfortunately, it appears to be a lesson that some organizations must keep relearning.

Reflecting on his 20 years managing supply chain marketplaces across multiple industries, Landsman says although organizations often talk about the need to do continuity and resilience planning, the actual momentum behind the follow-through often comes too late. Take, for example, industry response after the devastating earthquake and tsunami affected Japan in 2011. While many organizations had said those plans should be in place, some found themselves completely unprepared to respond or know exactly which contingencies they already had in place.

That was a similar experience for others during the height of the pandemic in 2020 and into 2021 where container shipping was significantly impacted. Not only were there issues getting supply containers into and out of ports, the lack of containers created a snowball effect for companies that relied on their availability, for example, pea farmers in western Canada. They need those containers coming in from Asia to move their product out of Canada, but couldn’t as the supply chain stalled. No containers. No normal pea shipments.

“Here’s the supply chain contingency that absolutely no one is thinking about,” Landsman explained.

When you take that one product, and then multiply it across the gamut of other products where it may be an ingredient, you can see just how quickly one event can snowball causing supply issues for others.

“So it’s understanding what the true contingencies are,” Landsman said, pointing out that from this example, the concept of a lack of shipping container availability probably was on no one’s radar—until it was too late.

That’s just one small example of how supply chain issues can impact a global market.

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Identifying and Quantifying Risks

Unfortunately, even with increasing events with widespread impact across industries, some companies still don’t look at supply chain continuity and supply chain risk management beyond the annoyance of having to send and get back questionnaires from your vendors. And even in cases where those questionnaires come back complete, many organizations don’t have processes or resources to evaluate if those responses meet their requirements or keep track of whether or not vendors are actually putting into practice what they say they’re doing.

For far too many organizations, the process of identifying and quantifying risks, especially at a third-party level or further down the supply chain, never moves beyond the surface.

“Most companies don’t use your cross functional team when measuring supply chain risk,” Landsman said. “And everybody has to come to the table.”

What would a cross functional team look like when evaluating third-party risk? Well, that’s dependent on a lot of variables unique to each organization, however, you might want to consider moving outside your traditional scope of IT and business continuity, and include others with other insight, for example, your finance team, who can give you more visibility into the potential financial impacts of a supply chain issue and what it might cost to respond to and recover from a disruption. These team members can also help you better evaluate vendor financial health.

These types of conversations can be invaluable when you’re selecting new vendors or looking to renew contracts or agreements with those you’re already using.

These cross-functional teams can also help you get more insight into other potential issues, for example, challenges in sourcing specific parts or resources through other suppliers.

“Almost everyone needs a seat at the supply chain resiliency table,” Landsman said.

While not an all-encompassing list, consider also including:

  • Engineering
  • Product innovation
  • R&D
  • Procurement
  • Production
  • Marketing
  • Public relations/crisis management

Materials and Movement

As we have seen with product shortages throughout the pandemic, for operational resilience to move from paper to practice, teams must also think about the movement of materials, from raw goods to finished products, across the supply chain, taking into account fluctuations of prices and availability during a disruption or disaster. That also includes considerations and planning for transportation, logistics, strategies, customer communications, and more.

Like Landsman mentioned earlier in the tsunami example, if your organization is forced to address this during an event instead of beforehand, it’s already too late.

Case in point, the availability of lithium, which is used across a range of products, such as batteries for laptops, smartphones and other electronics. If organizations are just now starting to think about the impact of this shortage—when we’re already feeling the effects—there may be few, if any, realistic solutions.

  • What if the product is unavailable?
  • Or what if the costs exceed your organization’s ability to pay?
  • Or the costs increase so much, you’re forced to price your product so high, you lose consumers?
  • How do you continue to be a viable business going forward?

Managing Beyond Pain Points

While these are just a few examples of some of the current pain points, the reality is these types of issues exist exponentially across industries. Even if markets were to quickly stabilize and return to normal, what’s the next big event and when might it happen? As resilience management professionals, we can’t let our guard down. We must always be taking an introspective and proactive approach to how we manage our supply chains.

So, where do you begin?

  • First, get out of the questionnaire only mindset when it comes to analyzing and responding to supply chain risks.
  • Look at your entire supply chain.
    • View it as a holistic part of your operational resilience.
    • Think of it as the veins pumping a lifeline through your organization.
      • If one vein fails, what is its impact on the rest of your operations?
      • Can it kill business instantly or can you keep functioning at reduced capacity?

Peel apart your supply chain all the way down to its core. Consider:

  • Where do you get your products, services, and resources?
  • What are your most critical functions and services?
  • Which supplier is directly related to those functions and services?
  • What types and degree of risks are associated with those suppliers?
  • What’s your organization’s risk threshold?
  • What’s the impact of disruption or loss of that supplier on your ability to do business?
  • How will you accept, mitigate, remediate, or remove these risks?
  • How frequently are you testing/evaluating their abilities to respond to disruption as they indicate they can do?

Another important question to ask is: What types of relationships do you have with your suppliers?

“I’m a big believer in partnership with your suppliers,” Landsman said. “If you have a strong partnership with the suppliers in your supply chain, when your emergency becomes their emergency or their emergency becomes your emergency—and they understand that you care about the long-term health and profitability of their company and not just the long-term health and profitability of yours—they are going to be more willing to work with you in times of crisis.”

Ensuring positive relationships with your suppliers can help you better manage disruptions with the least amount of impact when they occur.

Challenges and Looking Forward

While many organizations continue to evolve their supply chain risk management practices as the nature of the pandemic evolves, it’s important to remember no plan is perfect and all plans should be continuously tested and evaluated to discover gaps and work to close them. We’ll have more success if we approach this proactively than being forced to respond during a crisis.

Some key takeaways to consider for supply chain risk management:

  • Have strong knowledge of your supply chain.
  • Understand where there are vulnerabilities within the overall value chain, including delivering products and services.
  • Understand the context of each third party.
  • Understand the importance each supplier plays in that value chain.
  • Find ways to decrease supply chain complexity of supply chains.
  • Have contingencies when supply chains fail—from logistics to transportation to raw materials.

Because supply chains and the use of third parties is such an important issue when it comes to business continuity and resilience. Consider it as part of your business case to justify further investment and resources into your program.

Supply chains are an important part of resilience management. If you’d like to know more and take a deeper dive into our conversation with David Landsman, check out the full podcast episode, “Peeling Back the Layers of Supply Chain Resilience with David Landsman,” from Castellan or wherever you listen to your favorite podcasts.

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