Kearney touts the benefits of a supply chain stress test

Editor’s note: This article originally appeared in Logistics Management. SCMR’s sister publication.

New research recently released by Chicago-based global management consulting firm Kearney, entitled “Strategic options to build resilience,” takes an in-depth at supply chain resilience, in light of the wide-ranging impact of the ongoing COVID-19 pandemic on supply chains.

“As the COVID-19 pandemic abruptly shuttered factories, offices, and facilities around the world, many companies found they had limited means to cope with the sudden shock to their global and regional supply chains,” Kearney noted. “As a direct result, they incurred gut-wrenching losses and face ongoing operational uncertainty.”

This situation, the firm noted, reinforced how, over time, supply chain resilience is as vital to a shipper’s profitability, as supply chain cost and performance. And that has in turn, led to approaching resilience outside of the lens of what Kearney called traditional disaster-scenario planning. What is needed, it said, is having the capability and capacity to be able to rapidly flex, or repurpose, assets, across an extended supply chain to be able to respond to unanticipated supply shocks, such as trade wars, major weather events, or permanent shifts in demand.

With that as a backdrop, Kearney has created a resilience stress test, for supply chains, as C-level supply chain executives are starting to look at their operations with a focus on increasing resilience and agility.

The resilience stress test is comprised of shippers’ operations across eight dimensions, in order to identify where shippers are most vulnerable to unanticipated shifts and future crises. The dimensions include: geography; planning; suppliers; inbound transportation; manufacturing; outbound distribution; product portfolio and platform; and financial/working capital.

Suketu Gandhi, Partner and Leader for Digital Supply Chain at Kearney, provided a detailed overview about what shippers need to do, in order a resilient supply chain, within the context of Kearney’s research.

Logistics Management (LM): What do shippers need to do, or know, in order to operate resilient supply chains?

Suketu Gandhi: A resilient supply chain is one that would continue to operate in spite of external shocks to meet volume spikes, adjust product offerings, respond to channel shifts, repurpose capacity and anticipate disruptions while knowing the full implications and tradeoffs between cost, performance, and speed to market.

To be flexible and agile in supplying the demand, shippers should start by having end-to-end visibility into all aspects of the supply chain from who supplies your suppliers all the way to where and how much product you have at any point in time.

For carriers, these resilience principles still apply, but their application is specific to the nature of providing logistics services. For example, a carrier’s network includes any sub-carrier owner-operators it uses as a part of its network. Having visibility here that is integrated with the planning operations is key to thriving in spite of external shocks that may involve volume spikes and shifting customer requirements.

LM: What steps should shippers take to, as the report says, “have the capability and capacity to rapidly flex or repurpose assets across their supply chains in response to unanticipated supply shocks?”

Gandhi: Shippers should understand the constraining points along the supply chain, dependence on critical components, limited supplier options, what alternatives are in place if any, whether specifications or processes are over-engineered, how much visibility and control you have on logistics, to optimize flexibility when needed and scalability from an end to end supply chain stand point.

For carriers, constraining points would be along their asset network, dependence on critical asset carriers, and overall coverage from a geographic perspective. For each of these areas, shippers need (1) visibility into assets, (2) ability to scale up assets (including additional pre-qualified sub-carriers), and (3) a flexible technology infrastructure that can seamlessly operate across the planning department, owned assets, and temporarily contracted sub-carriers.

LM: How specifically does the resilience stress test gauge resilience of shipper operations across the eight dimensions cited in the report? How should the resilience scores of the report be viewed?

Gandhi: The Resilience Stress Test we have developed at Kearney uncovers the strategic strengths and vulnerabilities of a company’s supply chain to help pinpoint and prioritize the most compelling opportunities to make it more resilient and agile. To accomplish this, we gauge the resilience of the company’s supply chain operations across eight dimensions to identify where it is most vulnerable to potential shifts and future crises. Resilience needs to be examined from an end-to-end supply chain view, not just in isolation for each individual dimension. Upon completing the test, metrics are also generated to numerically grade a given company’s supply chain’s resilience.

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