A Roadmap for Designing an Enterprise that Thrives During Supply Chain Disruptions. Part 1 of a 4-Part Series
Are these figures of speech and stories examples of gallows humor spun up by early supply chain professionals? We’ll never know, but it’s plausible!
The source of these musings shouldn’t be a mystery. We can all agree that the last few years have been challenging for everyone, to say the least. Remember when “all” we worried about were trade wars, tariffs and headless robot kittens on display at CES? Apparently, that was the fire. Then came COVID-19, the frying pan. If there were a Richter scale for global supply chain upheavals, COVID-19 would have to be a magnitude 8+.Hitting a Crisis Head-On
Companies around the world have felt turmoil on both the supply and demand sides of the business. As we listened to our customers and worked with them to use technology to optimize supply chain performance in the face of serious headwinds, a few themes began to coalesce and indeed demand our attention:
Given that one disruption gives way to another, what is the correct business goal? Can we help customers thrive versus simply survive? Can we at minimum present a series of options inside a planning horizon that gives planners time to evaluate trade-offs and act should they choose to? Is it better to have the opportunity to be wrong than to be completely paralyzed?
Part of Logility’s mission is helping customers during a crisis. Our customers’ supply chains are being stress-tested right now. How is our technology helping them?
What do CEOs think they are getting when they partner with us for technology and services? We think they want, and are right to want, a resilient enterprise.
Winston Churchill once said “Never waste a good crisis.” In the context of business performance, what does that mean? Strength through trials? Sounds like resilience.
Finally, like you, we’ve seen and admired how some companies have “used” the pandemic to build new revenue streams and change operating models to reflect shifting market forces. Here are two examples:
The pandemic accelerated “ghost kitchen” plans at Famous Dave’s. Famous Dave’s, which currently has 125 locations, is also planning to add drive-thrus at both its existing locations and its planned locations. Diversifying its footprint will help the chain better recover from the COVID-19 pandemic, which led to same-store sales declines of nearly 23% at company-owned locations during Q2 2020.
Chipotle recently announced its first-ever digital-only restaurant called the Chipotle Digital Kitchen, designed for pick-up and delivery only. The new prototype will allow Chipotle to enter more urban areas that wouldn’t support a full-size restaurant and allows for flexibility with future locations.
To us, part of what’s impressive about these moves is both firms’ ability to see and seize opportunity. Of course this speaks to strong leadership, but it takes a strong supply chain analytics infrastructure to pivot like this, and it takes trust.
In contrast, and unfortunately, some of the stories we hear don’t end well. A pre-COVID study of manufacturers, conducted by Supply Chain Insights, found that after seven years only 38% were satisfied with the progress they had made implementing advanced S&OP. You can assume that once COVID-19 hit that percentage dropped.
As supply chain professionals, we have real-world knowledge of how to help companies improve the consistency of supply, react to changing consumer behavior and expectations, and of course put our customers on a path to lasting success.
We felt an obligation to share, so in March 2020 we created a task force charged with codifying an operational model and program management methodology that would take CEO-driven enterprise-wide objectives and create a persistent, systematic roadmap. We have received overwhelmingly positive feedback from this process and now want to share it with you. It’s 12 steps, and here we touch on the first three:
Assessment. Be brutally honest and ask Does the business have a problem? If so, is it a priority to fix? How does it compare to other strategic priorities? If you tackle this problem, what’s the opportunity cost? You can frame this question in many ways, including Did we miss opportunity? Did we take on too much risk?
Justification. Assume the assessment yields a definitive Yes, we have a problem, and will continue to. In order to make your case, you’ll need to quantify what it’s worth to fix the problem. You could frame this exercise as: if, in 18-24 months, we were better able to do X and Y, what would be the return on investment?
This step might be at times awkward, frustrating, and exhilarating. But know this: if the C-Suite is ever going to understand supply chain — or at least try to — it’s now.
Vision. How will the organization accomplish the journey? Can you leverage the existing technology stack, or will you need something new, modern, something that pulls in suppliers? This is not a 5-year Pollyanna statement. Focus on ruthless pursuit of measurable improvements with unambiguous results in 2 years.
There you have the first three steps in Logility’s 12-step process for building a resilient enterprise. Click below for parts 2, 3 and 4.
Read part two here
Read part three here
Read part four here