Supply chain disruption has become a firmly lodged thorn in the side of leaders and organisations since the onset of the Covid-19 pandemic.
To make matters worse, many companies’ planning strategies and procedures have proved unfit for purpose in dealing with such unpredictability in the system.
An online poll conducted by MIT Center for Transportation and Logistics at the start of the pandemic revealed that just 16% of organisations had an emergency response facility for dealing with unplanned disruption in the flow of goods. The same poll found that bolstering risk management and tools ranked as the most popular ambition among supply chain managers.
Writing for MIT Sloan Management Review, M. Johnny Rungtusanatham and David A. Johnston point out that, even where they are in place, crisis-driven supply chain initiatives focused on tools and protocols are only as effective as the organisation’s ability to use them. Moreover, that ability requires the building of capabilities involving people, technologies, processes and policies in an effort to ensure the business can plan for, and respond to, known risks as well as “unknown but knowable” threats and their potential consequences.
Rungtusanatham and Johnston have identified six such capabilities: anticipate, diagnose, detect, activate (resources for), protect (against), and track (threats). These combine to create the ADDAPT framework based on the authors’ research into the response of public agencies and private enterprises to supply chain disruption. They insist the ADDAPT capabilities can help organisations gain an understanding of the causes of supply chain disruption and, in turn, use that knowledge to respond to problems and plan against their recurrence.
According to Rungtusanatham and Johnston, the ADDAPT framework has a wider breadth of focus compared with traditional risk management planning; it also has the ability to take organisations outside of their comfort zones to engage with external experts and perspectives, posing uncomfortable questions about potential risks.
The authors insist that, in the best-case scenario, the framework can help avoid supply chain difficulties altogether – or, in the “sub-optimal” scenario, limit losses and speed recovery following disruption.
They describe each aspect of the ADDAPT framework as follows:
Anticipate
Many companies simply forget past supply disruptions, along with their triggers and consequences, leaving them vulnerable to future problems. The “anticipate” capability looks to leverage previous understanding and increase awareness of potential triggers through the constant gathering and piecing together of information, and then stress-testing the organisation through thought exercises, drills and simulations.
Using the Murphy’s law principle of “what can go wrong, will go wrong”, organisations can anticipate problems from an evolving list of past triggers that could reappear in the future.
Key actions include:
- incentivising employees to share their thoughts and experiences regarding known and knowable disruption triggers
- formalising procedures and assigning people to gather information and thoughts regarding these triggers
- establishing “what-if” planning scenarios for disruption triggers
- conducting mock exercises and drills to simulate the triggers
Detect
A deviation in the physical flow of goods has a knock-on effect on other activities. For example, a delay to a delivery of parts can disrupt manufacturing schedules. Time is of the essence – the sooner a business becomes aware of the deviation in the flow, the longer it has to organise an alternative source of supply.
The “detect” capability sets up early warning signals for when supply chain triggers disrupt the physical flow of goods. Rungtusanatham and Johnston advise that this warning system should be prioritised towards the products at the highest risk of interruption or whose flow is most essential to the organisation and strategic partners.
Key actions include:
- encouraging stakeholders to report known triggers and deviations
- informing stakeholders of the warnings in place and connecting the system via communication protocols
- creating dashboards for access to information on deviations and planned activities, and to help shorten the decision-making process
Diagnose
If a disruption to supply is detected or experienced, an investigation should follow. Without sufficient examination, lessons won’t be learned effectively; what’s more, the experience won’t be codified to inform and support the other aspects of the ADDAPT framework.
For the “diagnose” capability, organisations need to devote time and resources – as well as critical thinking – to pick out the relevant facts during supply chain disruption in an effort to formulate a timely and effective response. Real-time data analysis is required as the problem is unfolding. Once the situation is resolved, the information can be examined to gain insights on preventing future disruptions caused as a result of the same risk.
Key actions include:
- providing resources and expertise to support problem-solving activities
- engaging with external stakeholders, including key customers and strategic suppliers, to gather information on supply disruptions, recovery actions and long-term prevention methods
Activate
In the face of supply chain disruption, the natural priority for companies is to stabilise the situation and establish a normal flow as soon as possible. This is where short-term solutions developed using the diagnose capability can be employed. However, their implementation requires the “activate” capability.
This means the dedication of resources – including people, equipment and funds – along with accurate information on the availability, location and readiness of those resources, to remove any obstacles to the implementation of the solution. Rungtusanatham and Johnston advise that normal budget rules and process oversight might have to be temporarily suspended.
Key actions include:
- documentation of the availability and location of people and materials, both within and outside the organisation
- providing emergency access and authorisation for the deployment of required resources
- establishing and deploying teams of experts within and outside the company to respond to the disruption
- formalising relationships with alternative suppliers
- sharing emergency response plans with relevant areas of the organisation, as well as strategic suppliers and key customers
Protect
Once a supply chain crisis is resolved, the organisation’s focus should shift to preventing future disruptions. The “protect” capability involves a combination of learning from the company’s experience and “data-driven creativity” for the revamping of supply chains, the authors explain.
New sourcing strategies and alternative transport routes could be a feature of this revamping, along with the redeployment of internal inventory and capacity. The short-term solutions activated during previous problems should be evaluated as long-term protection mechanisms against the recurrence of disruption. The objective is to increase the resilience of supply chains against known and unknown-but-knowable risks.
Key actions include:
- reviewing and evaluating solutions activated as long-term practices
- updating processes and systems supporting the other capabilities in the ADDAPT framework
- wargaming protection mechanisms with internal and external stakeholders to test their effectiveness against known supply disruption triggers
Track
The management and prevention of supply chain problems involves the continual collection of data to be analysed and shared in an effort to gain insights into disruption triggers.
The “track” capability allows organisations to define and monitor the red flags that enable early detection of problems, preventing “counterproductive firefighting”, the authors explain. It tests the effectiveness of solutions intended to stabilise the flow of products and protect against recurrence of disruption, providing the data and analysis necessary to support the decisions embedded throughout the ADDAPT framework while also being informed by their outcomes.
Key actions include:
- making ongoing investment in people and systems used for real-time monitoring of known disruption triggers
- providing dashboards for supply chain personnel to monitor the flow of supply chains
- identifying and defining prime indicators of disruption and risks
- mapping and communicating indicators for the normal flow of goods
Rungtusanatham and Johnston also suggest that supply chain management is established as a strategic function of the organisation overseen by a senior executive whose chief responsibilities encompass the early detection of threats.
They conclude that the ADDAPT framework will give companies a fighting chance of seeing off future disruptions with minimal impact on leaders, employees, suppliers, customers and the organisation as a whole.