I interviewed Thomas Tanel who discussed Get Some CHAAF - How to Achieve Supply Chain Resilience.
Dustin, thanks for having me today to discuss the idea of supply chain resilience. The New Normal caused by the financial crisis in 2008 illustrates the importance of supply chain resilience as a 21st century phenomenon in today's interdependent global economy.
The World Economic Forum’s Building Resilience in Supply Chains report stated, “Resilience is the ability of a global supply chain to reorganize and deliver its core function continually, despite the impact of external and or internal shocks to the system.”
In my 40 years of experience, the supply chain resiliency concept is still in its early stages; but to achieve it,there are five basic components for success that I will term CHAAF (Celerity, Hardiness, Adaptability, Agility, and Flexibility). This webinar will outline each of those componentsand confirm the benefits of achieving supply chain resilience.
Supply chain celerity—rapidity of motion or action—is a necessity as today’s supply chains move at a higher velocity than in the past which require extensive supply chain communications among trading partners to be more agile and responsive to your business’s needs. The timely and accurate exchange of information is more important than ever. There is little or no tolerance for errors or bottlenecks—and anything that is not immediately corrected can result in costly delays, penalties or potential cessation of activities for transportation providers and your organization’s trading partners.
Your supply chain is no longer bound by geography. The need to find economies of scale and lower costs will drive a further need for supply chain synchronization. Clearly, data needs to be captured and classified in a consistent manner at a detailed actionable level.According to a whitepaper Missing Link to SC Success published by GT Nexus, “80% of the data a company needs resides beyond its four walls, in the systems of global partners.”
Celerity really matters! Quicker response times help organizations react to customer needs faster and hence gain or hold market share, and as well to withdraw, when necessary. As Cleopatra suggested “Celerity is never more admired than by the negligent.”
Therefore, transforming raw data into useful, real-time business intelligence (BI) goes hand in hand with smarter, celeritous (ce-ler-i-tous) decision making. While it is human nature to avoid exposing potential problems to trading partners, fact-based information-collection tools can make supply chain risks visible and facilitate effective risk mitigation efforts.
Constant supply chain celerity and communication are the keys to managing a global supply chain that is changing by the minute. Celerity means that you are able to synthesize external and internal data and rapidly take action to minimize the impact of a supply chain disruption and can quickly adjust and respond to the market and economic conditions at hand.
Hardiness is the key to resiliency; and not only surviving but thriving under pressure. Hardiness enhances performance, leadership, conduct, mood, as well as physical and mental health, according to the American Psychological Association.
When you are faced with tough supply chain situations, do you stress out and falter? Why do some people step up when the same situation is presented to them? Researchers pin the difference between defeat and perseverance to what they call hardiness.It turns a negative event into acompetitive advantage.
As a case in point, Automotive Newsreported that supply chain management at Honda was being stress tested during March 2011, given that at least 113 of its suppliers were located in the affected areasfrom the earthquake and tsunami, and the ongoing nuclear crisis in Japan.
The common characteristics for being hardy and staying positive are dubbed the 3 C’s: commitment, control, and challenge attitudes. Commitment allows a person under duress to strive to keep involved as opposed to isolating himself/herself. Control leads someone to try and influence outcomes rather than fall into passivity and powerlessness. Challenge influences a person to grab stress as an opportunity to overcome it.
A great example of hardiness in the supply chain is the “Center of Excellence” concept---organizational hubs for focusing skills and resources. Gathering experts in one location provides a way for staff members in a specific logistics function to hone their skills and knowledge through the collegial exchange of ideas; therefore, seeing problems or stressors as challenges and opportunities. It involves having a sense of purpose and meaning in a volatile and uncertain supply chain world.
That's a genuine advantage in a world where supply chains are constantly at risk of unexpected disruptions.Usually organizations with this hardiness trait do not just survive, they thrive!
ain oriented organizations, in part, hinges on having an adaptable logistics operating structure that makes it possible to capitalize on opportunities as they arise and respond to supply chain risks without disruption. Resilience, at its most basic level, refers to an ability to adapt quickly to, or recover from, challenges and changes.
By way of example, the European debt crisis, the Japanese earthquake and tsunami, and the Arab Spring uprisings all had an adverse ripple effect, throughout the global supply chain,in 2011.
According to Charles Darwin, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” For clarification, he didn’t define the fittest as those that survive. His “fittest” were those endowed with the best equipment to survive, and that makes all the difference.
As Darwin observed (and he himself was at pains to point out), natural selection is all about differential survival within species, not between them---just like different supply chain streams. He said, “In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.”
Supply chain integration is still important but its principal limitation is adaptability: During periods of rampant change (like now), organizations with rigid supply chains cannot change gear fast enough, let alone survive.
The haziness of reality, the potential for misreads and the mixed meanings of supply chain conditions in the New Normal requires agile execution. Ambiguity can onlybe matched by agility!
Organizations benefit from agile execution, the ability to very quickly adapt operations to respond to market changes whether they result from new market opportunities, a natural disaster or other business variables, thereby enhancing the organization's performance.
A single risk event can easily disrupt at least one of your supply chain streams. In most cases, the impact of the disruption can be observed along the supply chain. Any hiccup will cause delays and even commotion. Recent incidents such as Hurricane Sandy in the USA show how such disruptions can severely affect even the most stable supply chain.
As defined by AMR Research, Supply Chain Event Management (SCEM) is a software application that supports control processes for managing events within and between companies. As part of SCEM, the Supply Chain Control Towers concept has come into being. A control tower operates as a single, unified command center for visibility, decision-making, and action which is based on real-time data for both inbound and outbound logistics flows.
It allows you to monitor your supply chain processes, providing visibility withinthe process and alerting appropriate parties to potential critical situations. As you would expect, dashboards or cockpits monitor supply chain developments and events in real-time along the supply chain.
Real flexibility demands strong, collaborative relationships with key suppliers and supply chain partners in order to jointly address capability gaps and help mitigate supply chain risks.
Today’s uncertain, turbulent environments expose supply chains to risks/disruptions that can significantly damage organizations and economies. Research conducted by the Business Continuity Institute (BCI) found that 85% of respondents had suffered at least one significant supply chain disruption in the last 12 months.
For example, flash memory is a global commodity, much like oil. Its pricing fluctuates with supply and demand. As PPB Newslink reported in March 2011, more than 40% of the world’s USB flash drive supply is produced in Japan. In fact, one major supplier, Toshiba, supplied 30% of the world’s memory chips alone. Due to the history-making earthquake and tsunami in Japan, memory prices jumped by 50 to 60% overnight–literally. Fear caused the price increase because of the unknown impact on supply.
How effectively an organization implements flexibility is reflected in their focus: On being reactive or proactive. Because we’re part of a global supply chain, we all felt the effects when the earthquake and tsunami hit Japan. How we experienced these effects would be dependent on our flexibility. Are you reactive or proactive?
Organizations are rethinking their supply chains to craft a strategy that can deftly accommodate broad swings in demand and supply. In fact, 64% of respondents to PwC’s recent 2013 Global Supply Chain Survey said they plan to implement greater flexibility to better respond to shifts in volume. That makes flexibility a top supply chain priority.
Flexible supply chains that incorporate event readiness are capable of providing an efficient response, and often are capable of recovering to their original state or even better postponing the disruptive event.
You can make a case that supply chain resilienceis a must-have in today’s supply chain because volatility is always around the corner for most organizations.
Two characteristics that distinguish companies on the Gartner Supply Chain Top 25 are an emphasis on supply chain strategy and a mind-set that strives for continuous improvement. In closing, aligning supply chain strategy with business strategy is the shift organizations need to transform a traditional, reactive supply chain into an agile, hardy, organization that adapts and flexes within a celeritous environment.
If you haven’t got some CHAAF, then what are you waiting for? How are you going to make your supply chain more resilient to the increasing likelihood of potential disruptions?
About Thomas Tanel