How to Stop Talking About Resilience — and Do Something About It

This episode of the SupplyChainBrain podcast is supported by GEP, a leading provider of consulting, software and managed services to procurement and the supply chain. Be sure to stick around after the discussion for a look at the company and what it offers to customers. But now, onto the podcast — Time to Stop Talking About Supply Chain Resilience and Start Doing Something About It.

Hi, everybody. I'm Bob Bowman, editor-in-chief of SupplyChainBrain. And this is the SupplyChainBrain podcast.

When it comes to supply chain management today, resilience is the not-so-secret word. COVID-19 has forced the discussion, although a string of prior disruptions, including earthquakes, tsunamis, hurricanes, floods and even geopolitical issues already had companies talking about how to keep product moving to market in a crisis. But many don't seem to have gotten past the talking stage. For all the warning signs urging preventive action, global supply chains are still struggling. Today, we'll talk about why that is with my guest, Mike Jette. He is vice president of consulting with GEP. He'll help us to understand what true resilience is and how it can be achieved in multi-partner supply chains. Here's my conversation with Mike Jette.

BB: Mike Jette, welcome to the show.

MJ: Thanks, Bob. It's a pleasure to be here.

BB: So, we're talking resilience today, which seems to be the word of 2021, not surprisingly, after all we've gone through in the last year. But there is a sense out there that a lot of companies are still struggling with the concept. What's the problem? What's your take? And why haven't things changed more quickly in those companies?

MJ: Sure. That's a great question. I mean, I think first where we are, the storm is still here. Well, obviously, we've seen a lot of improvement over the last three months here in the U.S. There's still a lot of shocks in the market. Globally, other folks are unfortunately not as far as long as we are in the U.S. in terms of vaccination. So, we've shifted. There's still a lot of disruption out there. We started a lot with supply disruption. Now we've got a lot of kind of unprecedented demand, things that we couldn't foresee, shipping containers kind of piling up in places that are atypical. So, we're still in the middle. I think that's really the first part is that we've probably got another six to 12 months at least before we get back to whatever the new normal is. So, I think that's the first piece.

From a second point, it's compounded by as things start to open up, everyone's eager, right? Whether it's consumers, whether it's companies. We want to capitalize on the energy, the excitement, the openness. There's a lot of new stuff going on. People are marketing new products, new promotions, trying to take advantage of the demand that's out there, and that's adding complexity into what is already a somewhat unstable supply chain environment. So those are kind of two sort of macro issues that we're sorting through. I think the third point and really probably the heart of our discussion is that folks are thinking about this topic, but there hasn't been as much action, I think, as any of us would like to see. So, I think it's really the beginning of the resilience conversation.

BB: Well, maybe we ought to back up for a moment and start out with just with a definition of what resilience actually means and why it's so critical to companies.

MJ: When I think about resilience and I think at GEP more broadly, there's really two key pieces. One is visibility. The second is agility. So, if we think about visibility, we obviously need to see the disruption before it happens upon our organizations. So that's the first piece. And then once we see those warning signals, the red lights flashing, we need to be able to adapt, right? We need to be able to shift how we're doing things. So, we need to be agile when we see signs of disruption. So, for me, resilience equals visibility plus agility, that sort of the equation that I tend to put out there. In terms of why it's so important, a couple of stats from third-party researchers. Forrester put out a survey in the third quarter of 2020, and they talked about folks who are more mature from a resilience standpoint. They grew at a rate of 2.4 times others in their industry. So, certainly, that's a powerful data point. And to sort of kind of the shifting importance, we actually commissioned some work with The Economist, and in that work, this was surprising to me. Sixty percent of the respondents said that resilience and redundancy were more important than speed and efficiency when they think about their supply chain. So, I think there is a recognition out there, and we're trying to kind of shift to that point where we're trying to action that recognition.

BB: Well, you certainly make a strong case for it. And a lot of companies certainly give lip service to it. And, especially in light of the pandemic, you would think they would be redoubling their efforts to make sure that they survive the next big disruption, and yet they still seem to be hitting a wall in terms of their resilience objectives. And I'm wondering what are the big challenges that they're facing today that stop them from going ahead as much as they would like to?

MJ: Yeah, I would break those challenges, I think. I see two challenges. The first are kind of scope-related challenges. And the second is what I would call mindset-related challenges. So, in terms of scope, I think there's a tendency to think of resilience as a supply chain problem, right. I've got a chief supply chain officer, a leader of that group. Bob, you're leading the group. This is your challenge. Obviously, supply chain is going to be taking the lead on those issues, but it cannot be done by supply chain alone. This involves sales, this involves product design, the entirety of an organization. So, I think some organizations are slow to recognize that it is really kind of a mobilization of all functions. So that's kind of one scope challenge. The second is, I think, companies have a default orientation to try to solve this within their own enterprise, right. This is something that we do within our company, but I think what we've seen, and certainly the pandemic has reinforced this is that 50 plus percent of the solution or the problem, if there are problems, is how we work with our trading partners, whether it's upstream or downstream. So, when we think about becoming more resilient, we need to have a much broader conversation. It's not just the supply chain function, and it's not just the enterprise that you work in. It's really a bigger scope that needs to be included.

BB: It's interesting because we use the phrase supply chain resilience all the time, and may be, that's a misnomer. It doesn't tell the whole story. And it puts you in the mindset of thinking that it's just related to supply chain. And interesting, you should put it that way. OK, so let's assume that leaders do want resilience. That's an obvious thing that you would think they would want. At the same time, it feels like this requires a certain amount of investment, a certain mindset shift. And I wonder, to what extent do we actually have to sell that to leaders, especially those who are under pressure to show quarterly results, who might be asked to make an investment. They won't realize itself until somewhere down the line. In addition to which, how do you sell the idea of protecting against something that never happens? And it's important to do so. So, in other words, how do supply chain professionals affect this mindset shift with their leadership?

MJ: It's great that you point out mindset because I think that's where it starts. If we don't have an organization pointed in the right direction about what needs to happen, all the technology, all the process change, it's not going to bear fruit. So, the mindset is really important. And I'd say one of the most important things that we emphasize in working with our clients is there's no finish line, right. We don't work for six months. We get a resilience diploma. We hang it on the wall, and we say, boy, I'm done. Thank goodness. Right. That was hard. No, this is a continuous capability. So, I mean, that I think of all the things that needs to change in terms of leadership mindset is that resilience is a muscle that we need to develop, but continuously exercise. So, I think that's the first piece. And then, I think supply chain professionals have a very important role in terms of helping to create that mindset shift.

BB: But then, I guess the question two then is you want to achieve resilience within the organization. And the big question is resilience against what? There are so many different things that could happen that can challenge your resilience. Does that affect the way in which you prepare for it? Or is this overarching thing you can do that will make you resilient against whatever happens to come down the pike?

MJ: It is about preparing for the unknown. So that is probably one of the challenges that I think supply chain professionals face when they're advocating doing things differently is that we don't know exactly what the future is, that we're trying to be able to best adapt to. So, one of the things I've seen happen a lot historically is that a supply chain professional thinks that there's an investment that should be made. New technology, revised distribution or manufacturing structure. They go to their leadership, and they say, hey, I want to do this. I think we're going to be more resilient if we do this. The leader says, OK, I understand why you'd be interested. Does this increase our costs? And the supply chain professional says, yes, in this area, maybe it goes up five percent. And the conversation ends there. What I would say in that conversation is there's sort of a fundamental flaw in the way the presentation has happened. When we're working with clients, I always coach them to present proposed changes in terms of three scenarios. One side of the spectrum is called the no or low disruption scenario. We hope that's what happens. We don't want there to be disruption. So that's one scenario we need to consider. Then there's the opposite end of the continuum, kind of the maximum disruption scenario. Maybe it's something like 2020. And then in the middle, there's sort of unexpected disruption, right. We're going to see some things that we didn't plan for, and this is our best guess at where things are going to land. And then, with the proposed changes, we look at the current supply chain, we look at the future supply chain and we evaluate how they work in each of those three scenarios. And we look at multiple KPIs when evaluating them. So, it could be what's our customer fill rate? It could be lost sales. Obviously, cost is going to be a part of that. We lay that out for our executives, and we say, well, which scenario do you think is most likely? And do we need to plan for, and which supply chain do you want to meet that scenario? So, I think I've seen that approach be much more effective in terms of getting leadership aligned to make a change from the status quo.

BB: But instead of talking to leadership about some vague idea of disruption and how you might respond, how important is it to come up with some kind of specific playbook that details exact actions that you take in the event of particular disruptions.

MJ: I'm advocating presenting where you have kind of a clear set. It could be, in these nodes of our supply chain, we want to hold some additional inventory. Maybe you want to localize some manufacturing in these regions to better be able to respond. So, all of those scenarios need to be supported by very specific actions that clearly translate into improved outcomes in the face of disruption.

BB: Are you pointing out the importance of getting outside the organization in order to achieve resilience. And of course, many people will simply very glibly say, well, the answer to resilience is collaboration. Why does collaboration so often fail? And how can one advance using that concept in a real sense?

MJ: Yeah, I think if you talk to a lot of people, what I find when speaking with our clients is sometimes, they say collaboration is a bad word. What they have found is that oftentimes collaboration is used to push responsibility onto the less powerful trading partner and make that trading partner responsible for mistakes that happen in the supply chain. So, I think there's a little bit of skepticism amongst professionals sometimes about collaboration. And I think there needs to be a reset to really get people kind of working and partnering in the way that we saw over the last 15 or 16 months that helped solve problems. To me, collaboration is not about restrictive KPIs. It's not about punishing our partners. It is about increasing the degrees of freedom between the partners, openness. And that collaboration is what allows us to be successful. I'm hopeful that the last sixteen months and all the time that has gone into addressing super mission critical problems is going to allow us to reset kind of this collaboration mindset. But there is a little bit of a history that needs to be overcome there.

BB: So, let's summarize the capabilities that you believe organizations have to develop in order to achieve this level of resilience we're talking about today.

MJ: When I think about it, there's kind of four key capabilities that come to mind. The first is visibility. Visibility into inventory, pre-inventory, post-inventory, across the entire value chain, right. So, a couple of points there. One is the value chain. That's not just my enterprise. I am concerned about my inbound materials from my supply partners. I'm concerned about in transit. I'm concerned about outbound. And I need to understand what is at the various distribution channels of my upstream partners. So, value chain visibility is a key piece of it. It all starts there. When we have visibility, we can begin to react. So, the second piece is collaboration. I like to call it hyper collaboration, meaning it's not just I'm talking on the phone, but it's advanced in that I am working with my partners. We have a common, accurate view of information. We can take action on that information through workflow. And things happen. We adjust. We're agile. So, visibility plus collaboration that gives us a lot of that resilience equation that we talked about previously. The two other capabilities that support that, one is the connection between supply chain and procurement. We've talked a lot about supply chain convergence over the last probably 10 to 15 years. It's probably been a little bit more about kind of planning to supply chain execution. A lot of times, there isn't that great connectivity with procurement. And that's really the primary interface to trading partners. So that connected, unified approach to both broader supply chain and procurement capabilities we see as being super critical to make sure that we eliminate the disconnect that too often happens at the supply chain-procurement interface. And then, the last point is really around making this manageable, right. If we think about most organizations, they are managing global supply chains with multiple distribution channels on the outbound side. It's hard to keep track of things. We need help from technology, right. We need technology that alerts when things are going, look like they may be going off the rails. [A technology] That senses. What are some of the risks? And that [technology] learns based on what's happened, where we're likely to have challenges. So that intelligence sensing is really that fourth capability to make sure that this becomes kind of a manageable, ongoing discipline.

BB: Mike, how does GEP help companies to achieve the kind of resilience we're talking about today?

MJ: There's basically three ways that we help our clients out. And you could think about each of those three ways as being appropriate based on where they are on their journey towards resilience. So, one of the things and we're seeing a ton of work in the space of last 12 months is helping our clients kind of frame the challenge and build the solution. A lot of firms recognize they have challenges, but they don't necessarily know where the major breakage is within their organization, within their broader value chain. So, we can come in, we can help them identify that. We can help them evaluate the different solutions to address those gaps. And then most importantly, probably for moving forward is quantify what are the benefits in addressing those gaps? What are the investments that it's going to take to put in those new capabilities? And what's a realistic time frame for solving those challenges? So that framing up of the challenges and building the roadmap, that's usually the first step. We believe that we, at GEP, are very well-positioned because we are a leader in supply chain technology, but we also have a robust consulting capability. And the combination of those two capabilities, we think, is fundamental to that first step of the journey. The next step is really about those new capabilities. For most supply chain challenges that we're looking at today, we see the solution as being a technology-led solution with accompanying process and change management support. So, we have our GEP NEXXE technology platform, which is an industry-leading supply chain platform purpose built for visibility, collaboration, right. So, we have built our capability over the last three years specifically to address those weak points in supply chains. And that is maybe different than some of the legacy players in the industry who are kind of more on the transactional. Let's track inventory. Let's do the accounting. We're really focused on that visibility, collaboration, agility. Again, those components that help us to make the resilience equation work. So that's the second way in which we help clients. And the third way is, as people have implemented new capabilities, we have clients where they want us to help us operate and continuously optimize certain aspects of their supply chain. So, in this case, we're actually a part of their team helping to run certain functions and most importantly, committing to year-over-year improvements in the key metrics that are going to drive resilience within their supply chain.

BB: Mike Jette of GEP, I want to thank you so much for sharing your insights on how companies can actually achieve resilience throughout the organization as opposed to just talking about it. I really appreciate that, as well as a few words about how GEP can help in that respect as well. Thank you very much for joining me.

MJ: Thank you, Bob. It's been a pleasure. And I'm passionate about this topic, and I welcome the chance to speak.