Operational resilience is pivotal in weathering supply chain disruption
- Published: Wednesday, 08 September 2021 08:55
Operational resilience is not just for the financial sector says Jennifer Bisceglie – there are positive reasons for moving to operational resilience in all sectors, and helping to manage supply chain disruption is one key reason why organizations should consider making the change.
Over the last couple of years, the UK supply chain has been challenged with continued disruption caused by issues specific to the UK supply chain, including Brexit, and strain placed upon the global supply chain by the COVID-19 pandemic and global trade wars.
These disruptions continue to impact almost the entirety of UK industry with supermarkets unable to fully stock their shelves, car production faltering amid a widespread semiconductor shortage, and with no end in sight for these difficulties.
The case for operational resilience
Given the current disruption to the UK‘s supply chains, there is a case to be made for operational resilience for both public organizations and private enterprises. Operational resilience is the ability of a commercial or public sector organization to continue to provide their products or services in the face of adverse market or supply chain events – or ‘shocks.’ Throughout mounting shortages, and the disruption of the last two years, it should be obvious to organizational leaders whether they have operational resiliency or not – those without operational resilience have been the ones consistently on the back foot, reacting to shocks as they happen.
Other symptoms of poor operational resilience in organizations include wasting resources through siloed teams, duplicated efforts, and poor communication, as well as long-term brand damage as customers and partners are let down through product or service disruptions or slowdowns. Despite the causes of supply chain disruption being outside the control of organizational leadership, how well a company reacts to them is well inside their remit.
Organizations that meet the operational resilience challenge will conversely find that they are able to continuously monitor for potential risks and proactively adjust for, minimise, and potentially prevent disruption. They identify disruptive events to evaluate exposure, find alternatives, and respond faster than other companies. By anticipating, modelling, and planning for possible scenarios, these organizations can build the skills required to mitigate damage from supply chain shocks and even take business advantage over their competitors from the disruption.
Institutionalising operational resilience
There are two key aspects when it comes to institutionalising operational resilience within organizations – the human aspect of people and processes, and the technological aspect of employing the right solution.
From a people and processes standpoint, there are a number of challenges that organizations must overcome to fully develop operational resilience in both the public and private sphere. Often, too many resources are allocated to managing threats – the individual disasters, hacks, and disruptions – with not enough spent on managing material risks – the negative impact to the organization. Threat management is reactionary and cannot scale with the speed and scope of a modern global business. Operational resilience is best achieved by strategising around business impact, evaluating alternatives, and modelling out the consequences of various risk categories and kinds of risk before they manifest.
Second, it must be understood that managing risk is a holistic enterprise for which the entire organization is responsible, not simply one person or team. Given the complexity of today’s supply chains, the traditional siloed approach is obsolete. Instead, organizations must improve how they coordinate, collaborate, and prepare at a multifaceted level. After all, risks to the supply chain can spring from multiple sources and every sector of the organization must be aware of this.
Lastly, risks must be managed beyond the immediate walls of the organization. Modern organizations rely on an extensive network of suppliers and partners that play an integral part in developing and producing their products and services. Identifying third-party relationships in the extended supply chain and visualising potential risk is a key element of operational resiliency.
Visualising the supply chain risk through technology
Although people and processes are half the battle for organizations looking to prioritise operational resilience, organizations are increasingly finding that traditional supply chain risk tools are falling short of the task. Outdated resiliency solutions such as supplier relationship management (SRM), governance, risk, and compliance (GRC), point-in-time surveys, spreadsheets, and broadly deployed manual processes are reinforcing silos and detracting from operational resilience.
Instead, organizations must adopt the latest operational resiliency technologies that can secure the most important attributes of supply chain security. These solutions must be able to map suppliers automatically, at an infinite scope, allowing organizations to decide if potential relationships are helpful or pose risk.
Organizations should also prioritise solutions that can monitor continuously for changes in risk profile before operations are disrupted. This entails assessing multiple risk areas including finance, cyber, geopolitical, regulations, operations, and environment, social, governance (ESG). Companies need to be looking at all the global events that have the potential to impact supplier operations – and tools that can automatically notify human teams when important changes are detected. Lastly, the ideal solution should model anticipated or actual changes in the extended supply chain in order to reduce risk and improve business performance.
This may sound like a weighty and complex demand to be placed on a technological solution, but it can be achieved through machine learning, AI, and natural language processing (NLP), which make it possible to collect and analyse massive amounts of high-velocity data. This technology gives ample warning of upcoming shocks in the supply chain, allowing human teams to act before the event occurs.
Preparing for the inevitable
When it comes to supply chain shocks, the only inevitability is that more will occur. Although the global pandemic may be waning for some countries into a less critical stage, it is not the only event disrupting trade networks. Indeed, Brexit, global warming and increasing geopolitical tensions will continue to add to supply chain disruption. These factors fall outside the control of UK organizations, but by placing operational resilience at the heart of operations, the private and public sector can weather supply chain shocks when they do occur.
Jennifer Bisceglie is CEO and founder of Interos.