Sourcing & Procurement - Supply Chain & Operations
Re-optimize supply chains in ever-increasingly volatile environments
Fractured supply chains and volatile markets are straining companies globally; acquisition of the right tools and processes is essential to managing and stabilizing your supply chain.
Markets are becoming increasingly volatile due to a long list of factors such as climate change, geopolitical issues, tariffs/trade, and health pandemics. These all cause significant supply chain issues and disruptions resulting in changing lead times, supply shortages, and financial impact both internally and externally at suppliers.
Global tariffs introduced in 2018 and 2019 provided companies with an excellent opportunity to build the methodologies, processes and tools needed to become more responsive to supply chain disruptions; however, it seems few companies learned their lesson. Now, in the current environment companies must adapt and take proactive measures, rather than reactively addressing disruptions.
Supply chain and sourcing have been core competencies of Applied Value for more than 20 years; our methodologies enhance productivity, advancement, automation, and intelligence. This report provides an overview of how to monitor, manage, and act on quantified risk exposure and impact throughout the value chain. It will cover key short- and long-term levers to mitigate the negative impact related to increased volatility and disruptions.
Organizations must develop a methodology, including tools & processes, to track market changes and trends to pre-emptively react during volatile situations. By monitoring relevant key performance indicators for each supply chain and category and creating a model to quantify impact, businesses can prioritize specific opportunities as well as risks to act on.
Shorter term, more tactical levers, should be deployed to fix immediate issues and take advantage of the market conditions. These consist of (1) renegotiating contracts, including capturing cost deflation (or minimizing inflation), (2) improving cash management and (3) addressing supply shortages.
Longer term, more strategic levers, should be established from the onset to re-optimize the supply base and value chain given the evolving market environment. These consist of (1) assessing supplier viability and compressing the supply base, (2) deep-diving supplier footprint for nearshoring and (3) re-evaluating category strategies including make vs buy, value chain setups, and flexibility.
Knowing which levers to pull in order to optimize your supply chain in response to market volatility is only one key aspect of planning for an economic downturn. In our Value Paper “How to proactively manage supply base risk in economic downturns”, we outline in greater detail steps your organization can take to effectively map and predict future risks and disruptions.