Are you prepared for the next supply chain disruption?

Sept. 15, 2021
In this Big Picture Interview, a supply chain expert explains why hurricanes, wildfires, and pandemics may no longer be the exception.

Per Hong is a partner at Kearney focused on Strategic Operations, and the lead partner for the company’s relationship with the World Economic Forum relationship. He has a 25-year career working with clients across a range of industries to mitigate disruption in their global supply chains and help them build long-term strategic advantage. In July, Kearney and the World Economic Forum released a report titled “The Resiliency Compass, Navigating Global Value Chain Disruption in an Age of Uncertainty”, and he spoke with Editor in Chief Thomas Wilk about some of the key findings.

PS:How did the report come about and what are some of the findings that you find most compelling?

PH: Over the last 18 months, we have experienced, and in many ways may still be experiencing, what is the largest single global supply chain disruption we’ve seen in our lifetimes with the COVID-19 pandemic. But more than COVID, we’re also experiencing a confluence of other disruptive forces, from climate change that is causing severe dislocations of supply and resources, to new technologies emerging, to global trade wars and barriers, to cyber threats, to geo-political tensions, to the now new surging demand from a fragmented and uneven reopening of the global economy post-COVID.

All of these forces are now intersecting in new, different and challenging ways that are radically reshaping global production, manufacturing, and supply chains, and forcing companies to step back, reassess and redesign their strategies in order to build resilience at the core.

The underlying premise for some of the research we initiated at the center of this report is that the pandemic is but a dress rehearsal for how we all must learn to adapt in the face of larger and more frequent levels of disruption that will continue to accelerate going forward. The next generation of supply chain, manufacturing and operations leaders, will be defined by their ability to withstand and adapt to these ever-increasing disruptive headwinds.

Big Picture Interview

This article is part of our monthly Big Picture Interview column. Read more interviews from our monthly Big Picture series.

Whereas the last 10, 15, 20 years was a supply chain environment which really was defined by the notion of cost competitiveness – by that I mean a push to areas of lowest labor and input costs in order to optimize supply chains at the core – the next 10-15 years of supply chain excellence will be defined by finding that balance of risk competitiveness in order to be able to ensure the reliability, the adaptability, and the resilience of our supply chains in our manufacturing systems going forward.

At the beginning part of this year, we engaged and surveyed senior operations executives from over 400 different companies to try and understand (1) how they think about resilience; and (2) to start to get under the skin of what are some of the strategies that have been deployed. How can we think about a future-range view in order to be able to manage the unexpected?

Looking across practices that companies are employing, one of the key findings out of our report is that only 12% of companies are prepared for the next disruption. That is, only 12% of companies are really positioned to be able to anticipate where future disruption can come from, have the strategies and the capabilities in place in order to be able to rapidly adapt to those disruptions to be able to pivot and meet those, and ensure the sustainability.

PS: That 12% number really caught my attention when reading the report. In a country the size of the U.S., we’re geographically diverse enough that any number of different catastrophes can happen at the same time in different regions. And only 12% of the companies are in a position of being leaders to adapt to those changes effectively.

PH: Absolutely. Even inside the U.S., we’re not insulated from disruptions that are happening outside our own borders. The dislocation of supply and the resurgence of the demand that we’re seeing everywhere on a global basis has direct impact for us here in our country that we need to be able to manage and be able to prepare for.

Take for example the cyber-attack on the Colonial Pipeline on the East Coast of the U.S. earlier this year, or the record heat that has plagued the West Coast this summer, or the resurgence of the delta variant. All these factors are occurring and will continue to occur, and so it isn’t a question of whether we will be disrupted, but when and how big. And so, then it’s incumbent on us as leaders in the industry that really think through, how are we going to make sure we’re prepared?

This story originally appeared in the September 2021 issue of Plant Services. Subscribe to Plant Services here.

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