Joshua Nelson, Director of Strategy and Operations Practice at The Hackett Group, regarding the group’s “2012 Key Issue Study”, highlights what supply chain managers and executives have identified as the key issue for supply chains and supply chain managers. (See: Nelson, Joshua. "Evaluating Supply Chain Risks with Single vs. Multiple Vendor Sourcing Strategies." Spend Matters Evaluating Supply Chain Risks with Single vs Multiple Vendor Sourcing Strategies Comments. Spend Matters, 28 Feb. 2013. Web. 01 Mar. 2013.)
Granted, Nelson and the supply chain “2012 Key Issue Study” do not put it quite so bluntly as I do. Nevertheless, I think you will agree with me.
The Hackett Group’s study found the following to be the top three “major” or “critical” supply chain issues as reported by the managers and executives surveyed:
- Improving supply chain flexibility/agility (92 percent)
- Improving cross-organization collaboration – improving planning (77 percent)
- Mitigating supply chain risks (e.g., supply disruption, severe quality) (77 percent)
My opinion—drawn from these three leading “critical” issues—is that these three all point to precisely the same core issue and essential resolution. These are all pointing to a singular, yet very real, challenge. The singular solution to this singular challenge has, in my opinion, also a singular side benefit.
What is this singular issue?
The singular, most important issue is the need for supply chain agility.
Of course, issue number one (above) clearly states that supply chain “agility” is the issue. But what about numbers two and three?
Let’s look more closely.
From what I have observed, number 2 (above), after seeking improvements in cross-organization collaboration (especially collaboration between supply chain partners), generally has one end in mind—namely, increasing agility. The side-benefit is the drive for agility automatically drives down supply chain risk at the same time.
So, while a firm’s drive for improved collaboration might be described by management as a pursuit of “risk mitigation” or “risk management,” it almost always tends towards increasing supply chain agility as the method by which reduced risk is delivered.
“And, what about the ‘improving planning’ part of this?” I hear you ask.
Well, since forecasts are always wrong, firms frequently find themselves caught up in a virtually endless pursuit of “better planning” and better planning mechanisms. These pursuits may provide some marginal improvement. However, the inherent unreliability of forecasting and planning methods and mechanisms end up introducing just one more variation into the whole supply chain mix. “Will our forecasts be ‘more right’ or ‘more wrong’ this month?”
The difference is this: unlike “improved planning,” improved supply chain agility has the ability to deliver improved performance virtually every time it is conscientiously and effectively applied. So, while a firm may seek “improved planning,” the real answer to their pursuit is “improved supply chain agility.”
And this, of course, inevitably leads us to issue number three above: “mitigating supply chain risk.”
What is the truly most reliable way to mitigate supply chain risk?
The answer, of course, is to improve supply chain agility. Improving the supply chain’s ability to respond rapidly and effectively to the unexpected automatically, and without further action, reduces the supply chain’s exposure to risk!
So, as I said at the outset the three top supply chain issues are not three, at all. They are, in fact, just one issue expressed three ways and finding their safest and most effective solution in one response—increased supply chain agility.
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