Harnessing the resilience dividend

Workers at the Port of Copenhagen are playing an increasingly precarious game of Tetris right now as a squeeze on shipping capacity leaves an ever-increasing number of containers with nowhere to go. It serves as a very visual reminder of both the intricate dance global supply chains perform to provide us with everyday goods and what happens when the music suddenly stops.

Supply chain experts predict that the current disruption could last until 2022 — and that’s providing we avoid further disruption along the way, which is far from certain. Consensus is forming that a ‘return to normal’ simply won’t cut it when it comes to supply chains.

According to Mckinsey, 93% of supply chain operators are planning to take steps to make their supply chains more resilient. Interestingly, respondents were split down the middle over whether to sacrifice short-term profitability in order to prioritize resilience planning. Companies may have underpriced the risk associated with extreme scenarios, but a move too far in the opposite direction could be just as devastating to future business models.

COVID exposed the folly of ‘just-in-time’ supply chains in areas such as healthcare and food supply. The economics of building more resilient supply chains in these areas might not stack up right now, but governments have calculated that risk of doing nothing far exceeds the cost of investing in localised manufacturing capacity.

For many businesses however, such wholesale reconfiguration is neither practical, nor economically viable. Revolution is coming however, and technology will be the catalyst. The combination of automation, robotics and 3D printing is already having a profound impact, not merely on where manufacturing capacity is located, but also what factories are able to produce.

Gone are the days where factories were set up to produce a single item at the lowest possible cost. Instead, a new generation of highly automated facilities can now be reconfigured in hours to produce a broad range of products according to real-time demand inputs. The same flexibility also makes it far easier to accommodate specifications from a variety of suppliers into production cycles.

Resilience need not end up an extra line item in the debit column of company balance sheets. Thanks to advances in technology, businesses can look forward to a future where supply chains are as cost-efficient as they are resilient. Make no mistake, however, revolution of this magnitude will only be achievable if the foundations we are building on are fully digital. If that means getting rid of paper-based processes once and for all, then frankly that feels like the deal of a century.

Read more in the full Q2 2021 Global Trade Health Report here