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Practical Insights (Blog)

Is Today's Supply Chain Model Dead? Have You got its Replacement Ready?

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A recent executive discussion document co-authored  by Maine Pointe and Michigan State University (MSU), argues that, while the supply chain may not be responsible for all the problems attributed to it, the vulnerabilities exposed by the current pandemic necessitate rapid and far-reaching changes to prevailing supply chain and business models.

In brief

  • The current pandemic is the latest in a series of global risk events which have exposed serious vulnerabilities in the supply chain and operations
  • Business leaders are under enormous pressure to quickly limit short-term disruption, support recovery in the mid-term, and ensure greater supply chain agility, resilience and optimization in the longer term
  • The financial crisis of 2007/8 changed and reshaped the financial world. Twelve years on and the pandemic has exposed extreme vulnerability that will lead to fundamental shifts in global supply chains
  • It will be the catalyst to rethinking how organizations are led, organized and operated which will lead to a fundamental rebalancing of the supply chain and business operations
  • The time to take strategic and implementation action is NOW

There is no doubt that the global pandemic has exposed vulnerabilities in the current, cost-driven supply chain and business models that many businesses were previously unaware of. However, that doesn’t necessarily mean the entire model is obsolete. Knowles and Melnyk argue that supply chain management itself is right and the question we should be asking is whether or not we currently have the right supply chain model, balance between global and domestic and emphasis (cost vs. responsiveness and sustainability). With the likelihood of more global risk events in the future, this is not simply a supply chain issue; it’s also a leadership issue.

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The great rebalancing

As companies pass the initial fire-fighting phase and begin to assess the damage/weak links in their system, many will enter a phase of rebalancing; building supply chains that have better levels of financial, competitive and legal resilience. This rebalancing will involve more than focusing on building better resilience, it will center around strategic repositioning as businesses work out how best to compete and thrive in the uncertain, post-COVID-19 economic environment.

Knowles and Melnyk believe a number of factors will shape the the post-COVID 19 business world. These include:

  • The renewed primacy of politics over economics
  • The customer has changed
  • New businesses have, and will continue to emerge
  • The decision to have global supply chains and operations will be revisited
  • Technology will play an increasingly important role
  • The supplier base will be different

Businesses will be under extreme pressure to rapidly adapt to this changed world and restore profitability quickly, but not all will have the strategic and financial resources to rebalance their risks and operations for long-term recovery.

Six practical steps business need to take now

To hit their 2021 numbers, leadership need to clearly assess where their business is today and where they need in the coming months. The paper sets out six practical  and urgent actions which businesses need to take to ascertain this.

  1. Carry out review/post-mortem
  2. Reassess and optimize the global manufacturing & distribution footprint
  3. Build in a higher level of sourcing optionality and collaborative sourcing to de-risk the supply chain
  4. Digitize supply chain and operations to optimize for visibility, speed and agility
  5. Ensure you have an end-to-end approved supplier process
  6. Realign the organization and inspire a digital transformation culture focused on service and risk

Time is of the essence as executives and boards ask themselves, “what are we going to do to rebalance our supply chain model and ensure you ensure you have a resilient, digitally enabled, agile supply chain and operations of the future?”

MSU Supply Chain Paper Thumbnail with outline-3Read the full discussion document here.

If you would like to discuss any of the points raised in this article contact the authors Simon Knowles sknowles@mainepointe.com or Steven Melnyk melnyk@broad.msu.edu

About Us

Maine Pointe, a member of the SGS Group, is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics, operations and data analytics. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the plan-buy-make-move-fulfill digital supply chain to deliver the greatest value to customers and stakeholders at the lowest cost and risk to business. We call this Total Value Optimization (TVO)™.

Maine Pointe’s engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com

Topics: Supply Chain Resilience stabilize-recover-rebalance post-pandemic world