A white paper by UT Knoxville’s Haslam College of Business has shown how investing in supply chain agility could help firms tackle catastrophic supply chain disruptions.
According to the paper produced through UT Knoxville’s Advanced Supply Chain Collaborative (ASCC), supply chain disruptions can severely impair a company’s financial health and it takes years for a firm to recover from disruptions’ aftershocks, straining every facet of their operations.
This is made evidently clear by a well-known study that analyzed more than 800 supply chain disruptions between 1989 and 2000.
According to that report, major supply chain disruptions led to devastating consequences, with sales declining by 93% and operating income dropping by 107%.
The only way forward is investing in supply chain agility which could enable companies to quickly adjust tactics and operations to respond to changes, opportunities or threats, notes UT Knoxville’s white paper.
This is significant especially when one takes into consideration the 2008 global financial crisis and the more recent 2020 pandemic that exposed the vulnerability all firms face.
The paper asserts that companies believing such calamities will not befall them – along with lesser disruptions – are just indulging in wishful thinking.
In such a volatile environment, the authors say, a firm’s ability to create an agile supply chain may be key to gaining a competitive advantage.
The basis of the ASCC- produced white paper are dozens of interviews conducted with industry leaders. It reviews key barriers to investing in agility, offers guidance on identifying and valuing agility projects.
Apart from this, it presents best-in-class practices for building a more agile supply chain with multiple examples of successful supply chain agility initiatives and practical advice on implementation.
The interviews revealed that many companies believe their risk management strategies are sufficient protection against supply chain upheavals.
But risk management reacts to negative events, while agility proactively addresses possible dangers, helping organizations minimize or avoid problems altogether.
Furthermore, agility allows companies to focus on the potentials – such as increasing sales when a disruption forces competitors offline – rather than the risks of operating in a dynamic environment.
The white paper offers a number of tools that supply chain managers can use to help identify target areas for investment in times of crisis.
These include a broadly applicable, quantitative approach to analyzing agility projects based on real options valuation, a fast-start checklist, and a detailed supply chain agility self-assessment table.
Image and content: Tom Fisk-Pexels/ University of Tennessee, Knoxville