Supply Chain Resilience

For some years now, we have been encountering the term "resilience" in a wide variety of areas - both professional and private. SCM gurus have been preaching for months that our supply chains need to become more resilient. But what does resilience actually mean? And what does it have to do with my company's supply chain?

According to Wikipedia, resilience (lat. resilire = to bounce back) is the ability to adapt to emerging problems or changes. This is a topic that actually played virtually no role in supply chains until two years ago. Supply processes were indeed complex and global - but could generally be predicted and controlled quite well with the appropriate tools.

New challenges in supply chain management

This ability to plan changed fundamentally with the onset of the pandemic. Companies were suddenly faced with unprecedented challenges and market situations. Due to the lockdown, there was suddenly no demand at all in certain industries, but plenty of stock and free capacity. In other industries, the opposite was true. Still others had both supply and demand, but were unable to deliver due to closed ports and transportation routes. As different as the challenges were depending on the industry, they had a drastic impact in almost all cases. And unfortunately, that's not the end of it ...

Limitations of classical planning and forecasting solutions

Supply chains must therefore become much more resilient overall! But how predictable are such events? Especially when cases occur that have never happened before in this form? What is the use of classical planning and forecasting based on historical data? In my opinion, the answer does not lie in a software solution, artificial intelligence or mathematical algorithms alone. Of course, these technologies and computational aids are still needed to identify anomalies and trends despite complex interrelationships. But they must be embedded in a superordinate process that enables experienced users with a gut feeling to react quickly and derive measures. That is the art. What is needed is a combination of science and art.

Business forecast expert Michael Gilliland comes to a similar conclusion, stating that there are clear limits to the accuracy of forecasting models and that the efficiency and effectiveness of the underlying processes therefore play an important role.

The process as the key

But what is actually the decisive process? There are a wide variety of definitions and demarcation models for this, which in my experience are not at all decisive in this context. Ultimately, all areas must be taken into account in which relevant planning for corporate management is carried out - from financial planning to product range planning, production planning, delivery planning and sales planning. In order to be able to react quickly, an integrated view of all processes is needed that makes it transparent for the respective company who is doing what, when, and to what extent.

The individual process is the key and therefore always the starting point in our planning projects. It must first be clarified what the current process looks like in detail and how it should be optimally designed.  

The associated technology does not yet play a role at this point. The only thing that is clear is that it must be flexible. Because as soon as the process adapts to the situation, the IT system must also adapt flexibly. Not the other way around. "Process follows IT" is no longer a suitable approach in today's agile corporate world. It is not enough for the IT solution to cover the initial requirements - it must also be able to withstand future developments and grow accordingly. Regardless of whether business models, corporate structures or data sources change. What was true in the history of evolution also applies to IT systems: only those that can adapt to changes are successful.