Breaking the reactionary cycle by investing in supply chain resilience

Eighty per cent of companies are unprepared to quickly address disruptions and their operations are not structured to absorb disruptions over the long term, according to a recent Boston Consulting Group (BCG) survey. These companies need to strengthen their resilience — the ability to quickly identify and assess risks, react fast and absorb the impacts of disruptions across the supply chain. Although the pandemic-induced supply chain challenges are easing, now is the time for supply chain leaders to reinforce their commitment to resilience. Each company should determine the optimal level of supply chain resilience in its specific circumstances and risk profile. This paper sets out a wide variety of actions to build resilience. Investments that allow companies to ‘absorb’ disruptions (for example, network design, multisourcing, product redesign and inventory) are costly to employ across the board, so a targeted approach is necessary to maximise return on investment. Investments to ‘recover’ from disruptions (monitoring and sensing, predictive modelling and crisis response) can be cost-effective and offer the promise of a first-mover advantage when crises occur. All companies need both absorb and recover capabilities. Our research finds, however, that few companies excel in all these dimensions, and the frontrunners are investing to increase their advantage. Companies can apply these capabilities to define a strong resilience strategy. Steps include gaining visibility into your extended supply chain, quantifying potential disruptions and the cost of actions to reduce the associated risks, and understanding your current level of resilience and how resilient you want to become. With this information, supply chain leaders can secure the investment they need.