The COVID-19 pandemic has revealed key differences between “fit” and “fragile” supply chains, says advisors Gartner, and how businesses deal with the disruption may provide competitive advantage across market verticals and specific industries.
While the most fragile focus on short-term survival, the fittest organisations see disruption as an opportunity to improve the value that their supply chain provides to the business, and ultimately their customers.
As a result, fit and functional supply chains are able to move ahead of the competition after dealing with high-impact events, but fragile supply chains find themselves falling behind.
Gartner, said: “Disruption is not a short-term situation, but a long-term trend that will most likely accelerate as we face climate change impacts, global power balance shifts and more.
“In the future, disruptions will occur more frequently and supply chains must be able to deal with whatever is coming next. Some supply chain leaders have understood that already and prepared their organisation accordingly.”
The most impactful disruptions for fit supply chains are those that involve “fundamental structural shifts” in the context of how the supply chain operates, such as new technologies, climate-driven transport evolution and changing competitive dynamics.
More fragile supply chains are most impacted by operationally-focused disruptions such as demand and supply shifts. By focusing on these challenges, they often lose sight of their long-term goals and overlook how structural shifts could help them maximise value.
It’s not the type of disruption that determines the supply chain impact. The type of supply chain determines the impact of the disruption.
Fit supply chains excel at focusing on the structural disruption and proactively translating those into competitive advantage. They are able to change their organisational design to capitalise on structural shifts and create new value for their customers.
How they approach long-term strategies and investments is another key difference between fit and fragile supply chains, Gartner found.
Most fit supply chains tended to maintain focus on the long term and preserve strategic investments during disruptive events, whereas fragile supply chains prioritised current-year performance and cut strategic investments.
During a disruption, supply chain leaders should try to avoid emergency cost cutting that put both short and long-term effectiveness at risk. Instead, cost optimisation should be an ongoing effort in the supply chain and cost decisions must take all the operating outcomes across fulfilment, reliability, risk and growth into consideration.
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