Published on October 29, 2023, 9:30 pm

Persistent pandemic and geopolitical conflicts have led to significant disruptions in global supply chains, resulting in substantial financial losses for businesses. Companies are now prioritizing resilience over efficiency and adopting strategies such as opting for costlier suppliers in less risky markets. However, these strategies come with their own costs. To mitigate these challenges, companies are investing in technology, regionalized supply chains, and simplified product designs. The pandemic exposed the limited visibility of supply chains, which were primarily built for efficiency rather than resilience. Integrating automation across organizational functions is crucial to enhance visibility and enable real-time collaboration with suppliers and customers. Sustainability initiatives have also become a priority for organizations. Moving forward, chief supply chain officers (CSCOs) should focus on enabling visibility through AI integration, developing agile action plans, and building responsiveness to market criteria. Managing disruptions better, enhancing flexibility, and achieving sustainability goals are crucial imperatives for supply chain operations in 2023.

A persistent pandemic and global geopolitical conflicts have taken a toll on businesses worldwide, resulting in immense supply chain challenges. According to the Business Costs of Supply-Chain Disruption report by the Economist Intelligence Unit (EIU), companies are estimated to be losing 6 to 10% of their annual revenues due to disruptions in the past two years. This financial impact doesn’t even account for the reputational costs as companies struggle to maintain supplies.

The report highlights that businesses are now prioritizing resilience over efficiency and taking steps such as opting for costlier suppliers in less risky markets. However, the EIU warns that these strategies come with their own costs. Nevertheless, companies are trying to mitigate these costs through investments in technology, regionalized supply chains, and simplified product designs.

Kuntha Chelvanathan, partner for supply chain and procurement transformation at IBM Consulting APAC, emphasized that the pandemic exposed limited visibility of supply chains for many organizations. She pointed out that supply chains were primarily built for efficiency, making them highly susceptible to disruptions. With numerous links in a chain, just one disruption can bring down the entire supply chain if it is designed solely for cost efficiency.

Chelvanathan further explained that supply chains were mostly constructed based on sourcing and manufacturing locations. The focus was on mass production rather than resilience. Therefore, when multiple disruptions affected various countries simultaneously during the pandemic, it exposed the lack of resilience within these global supply chains.

To enhance visibility within supply chains, Chelvanathan believes that efforts should be directed towards integrating automation across organizational functions. This would enable real-time visibility into various aspects of the supply chain and facilitate collaboration with suppliers and customers. Additionally, she noted that globally, about 56% of supply chain customers currently operate on hybrid cloud platforms, with 60% of them making further investments in digital infrastructure for scalability and value delivery. Sustainability initiatives have also become a significant priority for organizations.

Visibility is crucial in ensuring that supply chain operations progress smoothly without disruptions. Chelvanathan highlighted the importance of monitoring every element of the supply chain, from sourcing and production to distribution. She emphasized that visibility is just the starting point, as uncertainty is likely to persist in the coming years.

Moving forward, Chelvanathan outlined several action items for chief supply chain officers (CSCOs). Firstly, enabling visibility would allow AI and intelligence to be integrated into the supply chain, enabling proactive measures against disruptions. Secondly, developing agile action plans that can be executed when required is essential. Lastly, building responsiveness to market criteria such as sustainability goals and new product development should be a focus.

As organizations enter 2023, managing disruptions better, enhancing flexibility, and achieving sustainability goals are crucial imperatives for supply chain operations and CSCOs. By prioritizing these areas, organizations can improve the resilience of their supply chains.

To gain more insights into Kuntha Chelvanathan’s views on building greater resilience in the supply chain and her recommendations for CSCOs, you can listen to the full podcast episode on FutureCIO’s website.

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