Why supply chain perfection is impossible
By Jeff Metersky
As today’s supply chain executives increasingly face unprecedented challenges, the concept of supply chain perfection is unattainable. This is because it demands absolute control over all variables. This is an impossibility in today's VUCA era (a Cold War acronym adopted by supply chain leaders to describe a climate of perpetual uncertainty – global conflict, environmental disaster and economic instability).
To remain competitive, organizations must evolve to navigate supply chain disruptions with a mindset shift: embrace trade-offs.
Pivoting away from trying to achieve supply chain perfection helps industrial distributors navigate this VUCA era and make decisions that reduce risks, improve service levels and ultimately, keep customers happy. This also requires considering new technologies, adapting to shifts in global trade patterns or reconfiguring logistics networks for greater resilience and flexibility.
Excellence is about the journey of continuous improvement, not the destination of flawlessness. Rather than strive for a perfect system that requires constant reaction and response, organizations must plan for variability upfront and build decisions around ranges of inputs and outputs.
As the ancient Greek philosoper Plato asserted, leaders who strive for “excellence in all areas” rather than an “unattainable state of perfection” evolve and thrive in uncertainty. This rings true for supply chain success. The reality is that companies who consistently struggle to meet performance metrics often do so because plans are made and expectations set with no consideration for volatility or uncertainty.
Additionally, as new technologies continue to emerge, companies using more “traditional” systems find themselves struggling to adapt.
Perfection Leads to Micromanagement
The combination of monolithic systems and perfectionism often creates more problems than it solves, resulting in rigid processes that are difficult to modify quickly. Perfection-focused approaches can also create a toxic culture of micromanagement. Industrial distributors can maintain control while allowing for the ‘imperfections’ that naturally arise in complex systems by seeking an ideal range as opposed to a ‘perfect number.’ I’ve seen it countless times in my career: high-performing companies that actively pursue improvement know that imperfections simply achieve more success.
Antifragility: the Stoicism of Supply Chain
When confronted with uncertainty, stoic philosopher Marcus Aurelius suggests, “dividing the world into things which are under our control and things which are not.” No matter how hard we try, there will always be uncontrollable aspects of the network. Adaptability is crucial in responding to these opportunities and threats in real time. As Gartner Supply Chain Analyst Tim Payne says, it allows you to build an “Antifragile Supply Chain,” which becomes your competitive advantage.
“[Companies] are clinging onto fragile planning approaches, focused on plan accuracy, achievement and decision centralization.” Payne says, “A fragile supply chain hates mistakes and wants to eliminate them. A resilient supply chain sees mistakes as information to try to avoid them. An antifragile supply chain loves mistakes, as it can learn and improve from them.”
Antifragility Is All About Trade-Offs
To build a resilient supply chain in today’s VUCA environment, consider the following:No single strategy is ideal in all situations. Supply chain leaders must make daily trade-off decisions, carefully balancing competing priorities which may change from day to day and customer to customer. Taking a strategic trade-offs approach enables operators to ride the waves of an ever-changing global market to long-term success.
Here are some common examples of trade-off decisions supply chain leaders must make:
Standard vs. Custom. While standardization can reduce production costs and simplify processes, it can hinder performance when diverse customer needs and market conditions fluctuate. A customized supply chain allows for greater responsiveness and is purpose-built to meet specific customer demands. The challenge with this approach is that single-function solutions often come with a hefty price tag.
Speed vs. Cost. Speed is essential in responding to disruptions, but it can also come at the high cost of expedited shipping, increased labor costs or the cost of adding new technology for faster production processes. Conversely, focusing on cost savings alone may cause longer lead times for yourself and your customers.
Buffering Inventory vs. Lean Inventory. A lean inventory approach minimizes costs and improves efficiency but risks stockouts during disruption or unexpected demand spikes. Creating an inventory buffer provides a cushion against supply disruptions but uses up capital, increases holding costs and can incur spoilage risks.
In-House Capabilities vs. Outsourcing. Bringing capabilities In-house means better alignment with organizational goals but it can also require substantial investment in infrastructure. Outsourcing provides specialized expertise but contributes to third-party dependency and ultimately, less control over network operations.
Resilience vs. Efficiency. Stock redundancy, diverse suppliers and additional capacity all help to weather disruptions but may reduce efficiency and increase costs. Focusing exclusively on efficiency can streamline operations and cut costs but may leave the supply chain vulnerable.
Technology is Critical for Success in a VUCA Environment
To help make the best trade off decisions, utilizing modern supply chain solutions plays a key role in helping operators adapt to the VUCA landscape. Technologies, such as Machine Learning and Artificial Intelligence, enable companies to leverage smarter and faster composable solutions to provide insights to make the best decisions at the right speed and scale to optimize supply chain performance.
Utilizing smart supply chain technology such as analytics, provides insight that help users respond to rapidly shifting priorities and customer needs. It also helps users to quickly re-allocate resources to support immediate and long-term business goals for operational success.
Embrace the Reality of Trade-Offs for Long Term Success
Pursuing perfection is a noble but ultimately, unrealistic goal in a world where the only constant is change. Organizational success hinges on a mindset shift away from the perfect answer to making informed trade off decisions and adapting to continually shifting realities. Understanding the trade-offs will position organizations to make strategic decisions best aligned with long-term goals while staying agile enough to respond preemptively to unplanned challenges. These decisions are not always easy, but the ability to flourish will be defined by how these trade-offs are balanced.
As we continue forward into an uncertain future, embracing imperfections and building on past experiences are the only way to build supply chains that are not only resilient, but poised to lead the way in an ever-changing world.
Jeff Metersky is vice president, solutions strategy, at GAINSystems. He can be reached at jmetersky@gainsystems.com.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
