THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
Disruptions to supply chains come in many different forms: natural (eg, earthquakes, hurricanes) and man-made (eg, strikes, terrorist attacks). Globalisation is stretching supply chains at a time when market volatility is on the increase, exposing companies to greater uncertainty.
Global enterprises cannot rely on government action to protect them – indeed, it may even exacerbate the problem. Instead, they can mitigate these risks by becoming more “resilient”. This is a measure of their ability to return to normal, and the speed at which they can accomplish it.
Resilience can be achieved either through building up inventories or building in flexibility. Of the two, the latter is the better option, but it requires careful planning – for example, reducing the number of components and standardising design (as Dell and HP have done) – and strong supplier relationships (Toyota being a good case).
But the most important distinguishing factor of companies that bounce back quickly from a disruption is corporate culture. A flexibility culture is one where communication is pervasive and constant, and where even low-level employees have the power to take vital decisions. Creating such a culture is difficult, but not impossible.
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