Last week, Apple suppliers faced a common dilemma in the manufacturing sector: a sudden design change forced a supply chain to rush to absorb production delays and deliver on time. In this case, a last-minute adjustment to the iPhone 6 screen put manufacturers on a race to meet Apple’s as-yet-to-be announced September unveiling.
But the delay could have easily been caused by something outside Apple’s control—a part in limited supply or trapped in transit when a major disaster strikes a key supplier. And the delayed product could have been a commodity more crucial to public safety and critical infrastructure than the latest iPhone.
We watched this scenario unfold in real time following Superstorm Sandy. The storm disrupted multiple links on the fuel supply chain not only damaging refineries and pipelines, but also taking out the electricity to pump available fuel where it was needed. This one-two punch of limited power and fuel created a ripple effect, debilitating multiple critical sectors including emergency services and transportation.
The best remedy was flexibility in the fuel supply chain. Fuel transporters who had already built relationships with suppliers outside the region could supply their customers faster, the National Infrastructure Advisory Council found. In the face of emerging threats such as extreme weather and physical and cyber attacks, a flexible supply chain not only protects public safety, but business health.
As Yossi Sheffi, author of The Resilient Enterprise and professor at MIT, said “Supply chain resilience no longer implies merely the ability to manage risk. It now assumes that the ability to manage risk means being better positioned than competitors to deal with – and even gain advantage from – disruptions.”
Last year, the World Economic Forum (WEF) released “Building Resilience in Supply Chains,” which recommends four key ways to build resilience and flexibility into supply chains for any sector:
- Partnership – Broadening knowledge of a trade partner’s strengths and weaknesses while bolstering information sharing is an effective risk mitigation strategy. Strong upstream and downstream partnerships benefit both parties.
- Policy – Governments should take advantage of their central role in policy implementation and “aim for maximum flexibility during times of disruption while providing incentives for resilient behaviour during times of stability.” Trade-friendly policies during disasters can alleviate disruptions and adoption of supply chain standards can build in resilience.
- Strategy – Volatility is considered the “new normal” when managing supply chains, and it is vital that companies regularly examine and adjust their current supply chain strategies. Agility is key. According to the WEF, “it is the capacity to adapt, rather than the actual strategy, that will drive resilience.”
- Information Technology – Data plays a greater role in supply chain management now than it ever has. Companies that leverage these capabilities to allow real-time data sharing along the supply chain ensure more accurate forecasts and cataloging.
More than 80% of private sector companies surveyed by Accenture in 2012 considered supply chain resilience a major concern. In an unpredictable world, companies that recover from setbacks quickly gain a competitive advantage.