Managing the Supply Chain to Mitigate Macrotrend Risks
Our primary mission is to illustrate how future supply chain managers need to address the growing risks associated with complex environmental factors that will impact future business. The good news? Modern managers are already getting better at dealing with supply chain risk as it occurs. What the Spumoni and Liberty Linehaul West stories tell us is that proactive companies can turn a potentially disastrous situation into a market opportunity with proper forethought and action. The story of Nokia offers another classic example. Nokia’s supply chain managers were able to quickly bounce back in late 2000 after a fire damaged wafer inventory at their supplier’s factory—which just so happened to fulfill rival Ericsson’s demand as well. Nokia’s fast action relative to Ericsson positioned it to grow at Ericsson’s expense. Similarly, Toyota was able to recover relatively quickly in the aftermath of the 2011 Japanese tsunami and continue producing with only moderate hiccups. Nearly a decade ago, one major study found that a supply chain disruption could drop share prices by as much as 15%.7 With today’s supply chains more visible than ever before to investors, it’s hard to see how a company can afford to ignore potential disruptions we foresee on the horizon.
The differences between these examples and future outcomes are couched in orders of magnitude and event expectancies. The risks that supply chain managers face today pose only temporary threats that are relatively minor in magnitude (with a few exceptions). However, the future’s “new norm” appears to encompass the permanent and systemic occurrence of what we would today classify as major threats. “Carmageddon” may soon spread through cities like the plague, and China won’t be the only country that automakers struggle to service. These incidents are isolated today. Tomorrow, they will not be.
We believe that only firms that have painstakingly prepared for the macrotrends’ long-term impacts will be sustainable. Effective supply chain management can save companies from the megatrends heating up in the global landscape, facing challenges with the help of models like DSI and GSCF as ways to separate from the pack of competitors. This will require attentive management of the eight GSCF processes, with consideration given to the shifts in the business environment we describe. Even those who have been successful in the past must realize that the rules are constantly changing. New threats will call for shifts in supply chain strategies and practices. The remainder of this book outlines the future of supply chain management as we see it. It also provides details on how to develop the necessary strategies for your organization to flourish in light of unprecedented global business transformation.