Supply Chain; Vulnerability, Visibility and Value

The supply chain enables trillions of dollars worth of goods movement globally and can be correlated to the success of companies. Supply chains cover a broad scope of activities, which includes sourcing, procurement, inventory, transportation, distribution, operations, sustainability and replenishment. Some definitions of supply chain now identify it as a critical component of a company value chain, the backbone of companies and, more importantly, the global economy. When there is a shock to this global chain, such as COVID-19, it can cause significant disruption to company operations. Supply Chain Canada's open survey recently reported that 70% of respondents had seen disruptions to their Supply Chain by COVID-19. Through the global COVID-19 pandemic, did your supply chain experience significant disruption? Were you shocked?

Figure 1: Basic Supply Chain Model

Source: Supply Chain Skill; http://www.supplychainskill.com/supply-chain-management/articles/fundamentals-of-supply-chain-management-12.php#.XrFg0ahKjQM

Over the years, with a focus on cost sustainability, inventory optimization and overall cost reduction (cost extraction) strategies, the pandemic is highlighting vulnerabilities, gaps and a lack of end to end visibility in many supply chains. What weaknesses and vulnerabilities did you discover? Did you have the visibility to your end to end supply chain?

In surveying recent articles on supply chain and COVID-19, a common keyword is resilience, the ability to recover from challenges. Resilience will need to be part of planning to reduce future disruptions and shock to supply chains as we head into a new normal, whatever that may be. Resilient supply chains can be characterized by preparation and planning, agility (willingness to learn and apply that learning), and adaptability (embracing change). Resilience can be achieved through a well informed and integrated approach to the overall management of a supply chain.

Resilience, agility and adaptability will be elements of building an overarching competitive advantage in supply chains as companies enter a post-pandemic world. The supply chain is at a unique moment in history, and how companies address the vulnerabilities and gaps will reflect how the embedded competitive advantage within will be leveraged as part of a company value chain. While the supply chain is not the entire story through these disruptive times, how well a supply chain is managed will separate leading companies from laggards. 

Moving from Supply Chain to Value Chain

If you are moving from a supply chain to a value chain view, a supply chain becomes one operation within a value chain, which would now include other functions such as sales, marketing, human resources, finance and other infrastructure support areas. This would be in direct contrast to a more siloed company approach.

Figure 2: Porter's Value Chain Model

Source: The Investors Book; https://theinvestorsbook.com/porters-value-chain.html

The idea of a value chain was introduced by Michael Porter, Harvard Business School, in his book Competitive Advantage: Creating and Sustaining Superior Performance (Free Press, 1998). Through analysis, you learn what works, why it works, what needs to change and how the pieces link to the whole and finally apply what is learned, creating new opportunities. This could include new processes, new technologies or new inputs. A value chain view is not without its limitations, such as required time investment and a need for resource expertise.

The overall approach is worthy of consideration for many companies as a robust thought process, if not in practice. The end goal of a value chain view is a competitive advantage, value creation and increased profit. What might this mean for a company?

With the uncertainty we are still facing, the global impacts on value chains will make the complex even more challenging. We might expect these types of disruptions to be more frequent in our globally connected world going forward. What you learn today and lead with tomorrow will minimize future shocks to your operations.  

Some questions you may ask as thought starters:

Did you, do you, have visibility into your end to end supply chain?

What gaps and vulnerabilities did you identify in your supply chain?

Where do you need to invest in closing the gaps in your supply chain?

What do you need to do to transition to a value chain view of your company?

Do you have the internal capabilities and resources to address your value chain?