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Best Practices, Knowledge

A Conversation with Industry Leaders: How to Build Resilient Supply Chains

Risk management blog 8
Published: Reading time: 19 min
o9 Solutions The Digital Brain Platform
o9 SolutionsThe Digital Brain Platform
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In a recent roundtable moderated by Vineet Khanna, former Global Head of Supply Chain at Nestlé, and Dr. Stijn-Pieter van Houten, SVP of Consumer Products and Knowledge Innovation Lead at o9, supply chain leaders across industries shared their insights on the current risks and challenges their organizations face and the strategies they are employing to build more resilient supply chains. The conversation highlighted the importance of preparation, technology, and strategic resource allocation in navigating the volatility and complexity of today's global supply chains.

Question: What are the risks and challenges your organization is facing, and how are you preparing your teams accordingly?

A Head of Logistics in the Healthcare and Consumer Goods industry:

One of the key areas we focus on is decision-making and the speed at which decisions are made. It's crucial to act quickly in rapidly evolving situations, and delays often occur when all options haven't been assessed beforehand. I firmly believe that "fortune favors the prepared." Therefore, it's essential to have pre-assessed scenarios that can be activated when a trigger point occurs.

Additionally, we are looking into customer and product segmentation, which aids in faster decision-making regarding resource allocation. For example, deciding whether to use air freight, which may be too expensive for certain products. By having these options considered in advance, we can develop a risk mitigation strategy tailored to specific products or areas.

Another significant concern is the issue of disconnected systems. Many organizations suffer from this due to different ERP systems or incomplete integration. Often, the initial focus was on manufacturing, but the COVID-19 pandemic highlighted the importance of distribution and logistics. Improving these areas is essential for a more resilient supply chain.

A VP of Operations in the Tobacco industry:

Piggybacking off of what the previous speaker said, at my former company, contingency planning was taken very seriously at the highest levels. The lessons learned from COVID-19 reinforced the importance of these practices. One significant step we took was consolidating our ERP systems. Initially, due to numerous acquisitions and mergers, we had multiple SAP systems across hundreds of markets. We managed to reduce this number to just one system, ensuring consistency across the organization.

Another effective practice was risk assessment involving internal teams, external suppliers, and harmonizing the product portfolio. We moved towards a standardized global approach, which was crucial during emergencies. We pre-mapped contingency plans and communicated potential changes to our markets ahead of time to avoid surprises during crises. We also centralized engineering discussions and harmonized equipment across different factories. This involved identifying key markets based on financial exposure and gross margins. During COVID-19, we prioritized markets and allocated capacity accordingly, with pre-discussed plans in place.

In addition to contingency planning, we also negotiated with tier-3 and tier-4 suppliers, ensuring ample visibility and sharing key materials among multiple suppliers. This strategy provided flexibility and live-tested contingency plans. We ensured search capacity across different options and regularly tested these contingency plans, which proved invaluable during COVID-19. Managing multiple markets and contingency projects simultaneously was challenging, but it kept the supply line open and operational.

A Head of Supply Chain Management in the Manufacturing industry:

I agree. It all starts with good preparation. It's essential to regularly assess your supply situation, know where your suppliers are located, and identify potential risks. While this might seem basic, doing it consistently is crucial. Instead of just reacting to problems, it's important to anticipate and prepare for potential issues before they fully materialize.

For example, if a particular region has a geopolitical risk, you might build up stock in advance. This proactive approach helps mitigate risks without adversely affecting your company's financial performance.

Resilience in the team managing the problem is also vital. It's not just about having skilled people but also about training them to handle various situations effectively. This includes building a diverse network of suppliers across different locations to manage risks better. A previous speaker mentioned splitting volumes between different suppliers in different geopolitical contexts, which is also crucial. Having a mix of strategies and being able to react at different times is essential.

In critical situations, I've even reached out to competitors for help. While some might see this as a last resort, it can be effective. Maintaining relationships with suppliers, even those not deemed most important can be beneficial during tough times. These connections might help keep your operations running, even if just for a few days, which can be critical.

When faced with multiple crises, it's important to prioritize which issues to tackle first. Determine which problems pose the greatest threat to your key assets and focus your efforts there. Trying to address everything simultaneously might lead to collapse. Therefore, define the most critical battles and concentrate your resources to keep your business running smoothly.

An Executive Director of Supply Chain in the Consumer Goods industry:

From my perspective, it's very much about being ‘choiceful.’ We can't address every issue at once or everywhere simultaneously. Priorities will shift over time due to various factors, including geopolitical changes. Two additional factors that we haven't yet touched on come to mind: financial markets and regulatory issues.

Financial markets have significantly impacted us, particularly the availability of cash in certain markets due to inflation and dollar shortages. This affects how we operate and make decisions. Regulatory challenges also pose risks, not only from changes in regulations but also from how existing regulations are being applied in different markets.

To manage these risks, we've had to decide where a tier-one assessment is sufficient and where we need to delve deeper into tier-two and beyond. It's about being cautious and having scenarios prepared because we simply don't have the resources to investigate every potential issue deeply. We must prioritize and allocate resources effectively, learning from our experiences to improve continuously.

Partnering with the business is crucial to align our risk management strategies with growth opportunities. It's a cyclical process of learning and adapting, ensuring that we are better prepared each time we face new challenges.

A Global Supply Chain Resilience Leader in the Pharmaceutical industry:

Initially, I took a very top-down approach to building resilience, trying to be more visionary. However, I quickly realized that from a financial perspective, use cases need to be very much bottom-up, addressing specific problems directly. Given the extensive transformations we're undertaking, especially in digital, it's extremely challenging to balance resilience investments as an insurance policy against cost-saving initiatives. This has been my biggest challenge.

My approach now involves using actual issues we've encountered as use cases. For example, we've had problems with temperature excursions for some of our very expensive pharmaceutical products in Latin America. Implementing solutions like real-time temperature and location tracking visibility has been a use case for a pilot project. These bite-sized initiatives provide a lot of valuable data and are more manageable.

In a large organization, education and demonstrating outcomes quickly, every three months, is crucial. Showing the benefits of these initiatives helps gain support, especially from finance colleagues. The more visionary, top-down approach may be less effective in such contexts.

A Director of Global Supply Chain in the Alcohol industry

Every industry is unique, but the alcohol industry, especially post-recovery, is a bit unique. We have more or less a single source for production and manufacturing with very long supply chains. And, you know, we are very volatile and very dependent on macroeconomic and geopolitical pressures.

First of all, we are working on building buffers and capacity. This might not be hugely beneficial from a cost perspective, but at least what we're doing now is to broaden our bottling operations. For example, the Scotch will still be distilled in Scotland, but it doesn't mean we need to bottle every bottle of Scotch in Scotland. We can ship in bulk and start bottling in various locations. So, what we're working on now is to have a much bigger proportion of decentralized bottling. Of course, it helps us manage inventory better and leverage cash benefits, but the primary reason for this is resilience.

To the previous speaker’s point, we started a big project on ERP implementation a couple of quarters back. We have over 50 ERPs today in the group, so if your experience is true, it will probably take more than 10 years. In this fragmented ecosystem, shortening the planning cycles is another key strategic action for resilience. Traditionally, we operated on a quarterly business cycle, but now we are reducing it to monthly.

For example, a few months back, during the Red Sea crisis, we found we needed to review the overall supply chain weekly. This helped us be more proactive, identify real issues, and predict potential problems. For instance, why are lead times in India increasing while lead times in Singapore are only two weeks? Shortening the lead time and the overall planning cycle has helped us develop this muscle to be much more resilient.

We also have a huge portfolio and need to segment it properly. Some products sell for tens of thousands of dollars a bottle, and a big part of our portfolio is much more affordable. We need to design a supply chain differently for different segments. One of the things I'm working on now is to design a supply chain with different levels of resilience for different segments. This includes a differentiated stock strategy, planning cycle, and level of visibility. We can't have the same level of visibility for everything, so we need to differentiate and design supply chain collaborations accordingly.

Another big challenge for this industry is the mix of very short-term volatility and long-term impacts of decisions. For example, the whiskey I distill today will be sold 7, 10, 15, or 20 years later. If I react inefficiently to short-term signals, I jeopardize the future in a much more impactful way. Finding the balance between reacting to short-term signals and developing long-term plans, possibly AI-driven is crucial.

A Director of Global Logistics & Customer Management in the Cosmetics industry:

We are similar, as we have a single-source company with one production site in Switzerland. All products are produced in Switzerland. However, we have a global setup, delivering to over 80 countries. Our main challenge is more in the downstream part of distribution and resilience.

As a company, I think we have good visibility, with a control tower in place, and good control of our transport. However, when I consider examples like the Suez Canal crisis, I see our weaknesses in how we can react more flexibly and quickly in case of a crisis. Our processes are still very manually driven, and the information flow should be more efficient.

With the advent of digitalization, control towers, alert messaging, and push notifications, I feel there is sometimes a lack of responsibility within the organization. In moments of crisis, this lack of responsibility becomes more apparent. I believe our main challenge lies in addressing this issue effectively, including proper crisis management processes to streamline the information flow.

A Chief Procurement Officer in the Food and Beverage industry:

For some companies, the lack of processes becomes the unlock to act fast in a time of crisis.

And we lose big time in terms of stability. I'd say part of it is because, with a business continuity plan, you do not do it in a time of crisis. BCP is like an insurance policy, right? You need to think about it beforehand. You need to ask or discuss with the business what they want from our supply chain, from our end-to-end supply chain. What are the capabilities that we want to put in place? Is it for the best cost? Is it for sustainability? Is it for agility? Frankly, everyone requires different skill sets, different systems, and different tools. I don't think we have had this discussion, and when we have this discussion, it's everything.

I'll give you a concrete case. We had a very expensive material we had been trying to change for years, conducting test after test. The first time we discussed this was in 2015, and in 2023, when the crisis peaked from the end of 2022 to the beginning of 2023, the decision was made in one hour and implemented without any issues. Strangely, in 2024, we had a big meeting with people concerned that this change might have bad long-term implications. Now that there is no supply issue, they want to revert to the old way.

For me, this is very revealing about companies that do not want to take risks. The riskiest way to deal with risk is not to have an appetite for risk because you will face it one way or another. You need to intentionally think ahead: What is my portfolio? What hero skills do I need to protect from this portfolio, and what will I willingly let go of? What are my important specs within the hero skills, and where do I need to take some good calls on agility within my specifications?

How do I plan? We all talk about wanting one number, one truth. Frankly, one number is the wrong number. I prefer to work with a range. What is the range, and how do we manage oversupply versus undersupply? How do we manage excess capacity versus under capacity? I think it's a huge muscle that goes beyond your technical capabilities.

A Director of Global Supply Chain in the Alcohol industry

In my case, I’m convinced that whatever small technology investments we have made have had a huge payback.

The point I want to make is that the more I look at the supply chain, especially in my company, the more I realize that technology evolution and usage have to come with the appropriate operating model for the supply chain. What I find is that big investments in technology sometimes do not give the right ROI because we haven’t identified the skills and capabilities needed to leverage those technologies.

Especially in my company, which is so highly decentralized, I realize that significant investment in technology is needed because that’s the only way we can build resilience and agility. However, it must come with an understanding of the right operating model. Absolutely. Whatever little investments we have made in technology to bring visibility and create alerts and signals have been super helpful.

A simple technology enabler that we’ve implemented is online tracking of stocks on ships, and that, in itself, has helped us a lot during the Suez Canal crisis.

A Head of Logistics in the Healthcare and Consumer Goods industry

We are at a similar stage in the journey. I think we are investing and have already invested quite a lot in analytics, connected data, and TMS systems. However, we are still quite early on in the journey and are still reactive instead of proactive and predictive. But I think it's the right direction.

I also really like what the previous speaker said about the mindset, which goes hand in hand with what another speaker mentioned about the organizational setup. Yes, you need to have that as well. You will need more than technology to solve your problems.

A Head of Supply Chain Management in the Manufacturing industry

I want to say too much information kills as well. So, we have to be careful. I have no experience using AI around this topic, so I can't comment on how relevant some of the tools available might be in that context. But I think having a news feed constantly telling you about all the problems and potential consequences happening around the world might not be efficient.

It all depends on how you set the parameters of this API to make it relevant, concise, and truly helpful rather than just another source of noise. I haven't come across a system that would be relevant in this way, but for me, it would be about setting it up so that the information provided is boiled down to what truly needs to be addressed rather than a constant stream of updates.

It needs to be relevant to the right person. What might be relevant to me is not necessarily relevant to the next person, even within my organization. So, back to how we are structured, how we operate, and what is pertinent to that particular user. I can imagine a news feed similar to social media that quickly gets scrolled through and ignored.

A Director of Global Logistics & Customer Management in the Cosmetics industry:

At my organization, we have no predictive tools in place. However, we have some good tools in our standard processes to help us day-to-day, such as receiving information when a delivery is late. As I mentioned before, I think it’s super important that there is a crisis management setup in a moment of crisis.

What’s quite important is that even with push notifications and digitization, you don’t forget the telephone number of your freight forwarder. Sometimes, everything seems so standardized; everything goes via EDI and seems fine, but then a crisis hits, and no one knows what to do anymore. I think it’s crucial to maintain this personal contact as well.

A VP of Operations in the Tobacco industry:

I believe we need to consider the technology perspective alongside the normal way of doing business because it can be crucial when a crisis hits. If you have the right visibility and connectivity, it helps a lot. I can give you several examples.

We used to have a Logistics Management System that provided global visibility of our primary and secondary supply chains, which is quite important. Knowing what you have and where it is at the moment is essential. Also, having your factories connected to share practices, as well as forecasting and scenario planning from a supply planning perspective, is crucial.

All these things bring numerous benefits and robustness to your supply chain, but they must come with the right protection. In the current environment, we’ve all seen cyber attacks and cases of multiple companies suffering when the bad guys get into that space and bring the business to its knees.

A lot of capabilities are fantastic, but you also need to bring the right protection because they make you vulnerable. For instance, in a factory where you have EDI with a supplier team, sharing information on downtime and losses creates an angle of attack for those bad actors. So, you really need to bring the right protection as well.

A Global Supply Chain Resilience Leader in the Pharmaceutical industry:

I would just like to add that the US-China decoupling and the Biosecurity Act in the US heavily impact the pharmaceutical industry and vaccines, as well as ESG and all the reporting requirements. I am by no means a sustainability expert, but I am using very specific requests from our board, stakeholders, and external reporting requirements to address areas where we lack visibility, such as the ESG impacts of our tier-two supply base and our China exposure.

We think we understand our tier-one suppliers, but we don’t fully understand our end-tier suppliers. I'm using the board's requests as justification to obtain this data, which requires some investment. We are starting with a few pilots to investigate this. My approach focuses on addressing more acute or operational issues that require immediate attention while also recognizing the additional benefits these efforts provide.

The challenge I face in resilience is demonstrating the incremental benefits to many different stakeholders, including insurance, security, IT, supply chain procurement, finance, and public affairs. I have to paint a clear picture for them on how the investment helps them incrementally, which can be challenging. It requires stepping outside of my function and thinking about the organization as a whole.

A Head of Logistics in the Healthcare and Consumer Goods industry:

Another approach I've been using on the investment side is creating savings in other areas and utilizing parts of those savings to build resilience in key areas. The key is to build the bigger picture and show what’s at risk. By creating savings in other areas, you have better selling points to push through investments in areas that will ultimately make you more resilient. This strategy not only addresses immediate needs but also demonstrates the long-term benefits of investing in resilience.

An Executive Director of Supply Chain in the Consumer Goods industry:

One more thing to add: although it's still a cost, we’re leaning forward by adjusting resource assignments and focusing on enabling at least some of the resilience measures. This might come at zero capital cost, but we can do the upfront legwork. For example, if it’s qualifications or registrations that primarily involve internal resources.

We’re pushing for financial capital approvals, which are often more difficult to obtain. I’ve equated it a bit to buying a gym membership but not wanting to actually do the work at the gym. So, we’re halfway there but not fully committed to completing the marathon when the time comes. At least we are taking the steps we can, and we have full control over the resources required to do that.

A Head of Supply Chain Management in the Manufacturing industry:

How do you sell resilience investments to the board, and how do you get funding for them? For me, it’s crucial to invest in people. Our discussions have a common theme: the ability to deal with a crisis heavily relies on the people you employ and their readiness. Investing in training, running scenarios, and taking time out to deal with risk management as a separate topic from day-to-day operations is essential. This not only prepares the team for crises but also contributes to their personal development.

Regarding AI tools, I don’t know if such tools exist right now, but like any other investment, it’s a matter of ROI. If we have good business cases and are convinced that such tools, with correctly set parameters, would help us, why not pursue them? Anyone sitting on a board will look at it from a return on investment standpoint. If an investment can bring substantial benefits, it’s worth considering.

To present a compelling case to the board, tie your proposal to recent crises. The closer you are to a traumatic experience, the better you can sell a tool that promises to avoid the next crisis. Choose your moment and present your business case well. Above all, be sure to convince yourself that the investment will make a difference.

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About the author

o9 Solutions The Digital Brain Platform

o9 Solutions

The Digital Brain Platform

o9 Solutions is a leading AI-powered platform for integrated business planning and decision-making for the enterprise. Whether it is driving demand, aligning demand and supply, or optimizing commercial initiatives, any planning process can be made faster and smarter with o9’s AI-powered digital solutions. o9 brings together technology innovations—such as graph-based enterprise modeling, big data analytics, advanced algorithms for scenario planning, collaborative portals, easy-to-use interfaces and cloud-based delivery—into one platform.


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