Differentiating through Resilience
Supply chain risk is one of the top 5 concerns in many boardrooms.
We live in a world where control and measurement are increasingly dominant and in which many executives believe that everything is within their control. “What cannot be measured, cannot be managed” is the perceived wisdom, so they set out to control and measure everything; even the uncontrollable. But as we all know, in the logistics environment there is much that cannot be controlled yet has significant influence on performance and therefore profit. Weather, equipment failure, customs hold ups, theft, and misrouting all contribute to logistics uncertainty and are largely outside the control of any one company executive. So the boardroom angst about supply chain risk is well founded.
This article is about logistics resilience and how you can mitigate supply chain risk by adapting it and differentiate your company at the same time. The idea is simple: If you can’t control it, then adapt to it. Build resilient logistic networks that can adapt to the stresses and shocks you cannot control. So what is resilience?
Resilience is the ability to anticipate, prepare for, survive and recover from disruptive events. It is the ability to adapt in the face of the unforeseen, being proactive in the areas you can control, and having mitigation plans for the areas that you cannot. Being resilient means acting ahead of time. You cannot pull resilience out of a box when you need it. It takes time to build it up so that your company is physically and mentally prepared when disruptive events strike your supply chain. Note that I said ‘when’ disruptive events occur, not ‘if’. Resilience is a mindset that accepts that bad things will happen and you must be prepared. Resilient companies establish “adaptive systems” that are robust and continue to operate in the face of disruptive events.
At RiskLogik most of the companies we encounter fall into one of five phases on the resilience continuum.
- Complacent – nothing will happen to us.
- Reactive – we will react when something happens.
- Compliant – we have done everything in accordance with existing regulations.
- Proactive – we have plans in case something happens.
- Resilient – we understand our risk factors and we are continually running scenarios to deepen our understanding and enhance our mitigations. All our plans are well practiced.
Those at Stages 1 and 2 are normally in survival mode, and are one disruptive event away from disaster. They are fragile, not resilient.
Stage 3 is table stakes. It is the minimum you must do to stay in the game. This is where the majority of logistics providers operate. The ISO risk process has been executed, but resilience is not part of the corporate culture. They are marginally less fragile than stage 1 and 2 companies but they are certainly not resilient.
Stage 4 is getting there, but if the plans are not well informed by a dynamic risk model that can change as the risk factors change then the plans rapidly become out-dated and unhelpful. If the plans are not practiced, then they are equally useless when they are needed. Whatever effort was devoted to risk management is lost and consequently is a waste of time and money.
If you want to break away from the pack, then you have to differentiate yourself by being more than compliant. Being resilient is a way of operating that demonstrates you are always ready to implement Plan B when something goes wrong. You have to demonstrate that the people in your company can adapt and deliver in spite of events beyond their control. You have to move toward Stage 5; Resilience. Resilience is about positioning your company to be the logistics provider of choice when everyone else is wondering what happened, and trying to figure out if they can stay in business.
Resilience means more than ensuring you are not the weakest link in the chain; it means being the strongest link in a robust, adaptive network. That will set you apart from the competition. Achieving resilience is not an overnight process however. It takes time, it takes money, and it often takes a change in company culture – a change in thinking.
Your customers and clients realize the real benefits of resilience. Being resilient means logistics purchasers can trust that you will get their product or supplies through when other providers fail.
About The Author
Rory Kilburn is VP of Risk and Resilience Solutions at RiskLogik. RiskLogik’s software is being used by the Government of Canada to analyze and plan for critical infrastructure risk events, by the Government of New Brunswick to map supply chain risks, and to support program management in Afghanistan. Prior to joining RiskLogik, Rory worked as a leadership and strategic development consultant in both public and not-for-profit sectors and served many years in the Canadian Armed Forces. For more information visit www.risklogik.com