Disruptions are getting longer in their temporal memory especially post Covid and costing CPOs, SCOs and CEOs a lot more sleepless nights and hurting financial performance. A survey conducted in 2021 by Statista, found that, on average, the cost of disruption for an organisation is a staggering USD184mn per year—the highest financial burden estimated in U.S.- based companies at nearly USD228mn and looks like we are just getting warmed up; the recent port shutdown in Shanghai, the Ukraine-Russia war, palm oil supply disruptions from Indonesia, poultry supply disruptions to Singapore, neon gas supply hits from Ukraine, deforestation levels increasing, truck driver availability in the UK, the list goes on...
If you think about it, these disruptions affect multiple levels and components in your product’s Bill of Material (BOM) — some at the commodity level vs some at the component vs some directly affecting your Finished Goods (FG). For example, come Monday morning, your CPO/COO ask you; ‘How will the shortage of palm oil affect us: you need to assess:
- Where, when, and what proportion of palm oil gets used in which and how many of your products?
- Who supplies it and how much of it?
- Where does it come from e.g., manufacturing location?
- How much Raw Material (RM), Work in Progress (WIP), FG inventory you have left—both palm oil and its affected BOM components?
- What is the unfulfilled demand—value and volume impact?
You would think these are reasonable, simple questions to answer. Our experience says the opposite. In fact, it’s a lot like the tip of an iceberg; you see 20 per cent visible while the remaining 80 per cent is under the water. It‘s this ‘20 per cent visible and 80 per cent invisible’ part that we will dig into, in this first episode of our series: ‘Deconstructing fragility in supply chains’.
In KPMG International’s Global Manufacturing Prospects 2022 survey, when asked about the impact of the pandemic on their organisations in 3 years’ time, more than 68 per cent of CEOs say they aim to ensure their supply chain is resilient in the event of a global lockdown. Now, we could build “resilience” into our supply chain by getting better in tracking where we lie in the face of disruption. We can calculate critical survival metrics like Time to Survive and Time to Recover and devise mitigation plans. But what if we can go beyond Resilience? What if we could try and uncover what’s at the bottom of the iceberg and see 50-60 per cent of it That’s where we believe that organisations could build Antifragility into the supply chain.
Antifragility, in other words, for a supply chain, is the ability to increase its capacity to thrive and adapt in the face of stress and shocks. And one of the key levers to driving antifragility is data and analytical insights from this data. As we go through this series, we will delve deeper into the five tenets to moving towards antifragility:
- Connect the dots and build an intelligent foundation
- Build a multi-dimensional view of risk
- Go beyond forecasts, sense
- Horses for courses, empathizing with end-users, matters
- Platformise: leverage technology to scale disproportionately
