Caught unawares by a supply chain glitch? Business continuity is more than a plan on a page

For a week, the world watched the Ever Given container ship, carrying 18,300 containers wedged in the Suez Canal. On Monday, it was freed, although the ripple effect will flow throughout the supply chain for some time.

The blockage of a vital supply route reminds us on the shortages we all experienced during 2020 as the pandemic took hold and disrupted every domestic, regional and global supply chain. Some Australian businesses were impacted far more than others. Across the board, all gleaned valuable insights regarding how exposed their operations were to supply uncertainty and the many unplanned choke points throughout the entire supply chain, especially as these supply chains were stressed and tested under extremely difficult circumstances.

In my eyes, there were some clear winners that stood up under pressure – toilet paper and tissues held up after an initial rush, the post and parcels kept flowing and those Life Sciences companies made sure that we didn’t run out of important medication.

So why did these businesses perform during a period when 95 percent failed? It is quite a simple answer – these businesses had created the necessary frameworks and structures that enabled them to be more agile and therefore responsive to change. Agile planning capability to proactively respond to supply side disruptions, agile operations with enough flexibility to meet changing customer preferences and agile networks that could respond to a variety of end-consumer delivery requirements.

Only recently (March 2021), Gartner analyst Jennifer Loveland highlighted how leading global organisations, in building resilience within their supply chains, had designed agility within their operations so they could thrive in an environment of constant change.

There are four key strategies Australian supply chain leaders should focus on in 2021 to facilitate more agility and responsiveness:

  1. Investment – technology time is here now – and will be even stronger in the future

Responding to COVID-19, we saw investment in technology solutions ramp up as businesses sought to drive efficiency and effectiveness, but also deliver safety features into their operations. Once these investments are bedded down and leaders realise that future capabilities are no longer expensive and intrusive to implement, the next wave of high-tech will further transform supply chains.

We are already seeing the focus shift toward intelligent process automation, predictive analytics, advanced supply chain planning, and the establishment of decision control towers powered by Artificial Intelligence, as critical capabilities enabling high-performing supply chains. KPMG’s own Supply Chain Predictor is an example of an AI tool that can analyse supply chains and predict choke points then provide real time solutions to ensure continuous supply chain flow and delivery to customers.

  1. Test and validate all Business Continuity Planning (BCP)

We know many business continuity plans failed in 2020, as they were not designed for significant events as brought about by the pandemic. What surprised many Australian businesses was some had no BCPs to cover major risks and others hadn’t tested or understood the impact of their defined BCPs. Some were overly complex or costly to implement and others simply failed to adequately support the business.

In 2021, many Australian businesses will reassess these plans to better understand where, how and why the supply chain failed but most importantly, to learn from this event. From this they will define better supply chain strategies to shore up supply certainty and enhance customer fulfilment. Each alternative strategy will be evaluated to ensure cost, customer service, financial impacts and risk factors are all balanced. They will also understand what new capabilities will be required to protect them into the future.

  1. Refresh the domestic supply chain

One of the few benefits arising from the slowdown of regional and global transport operations in 2020 was the growth experienced by local brands. As consumers continue to show support for domestic brands in 2021, Australian companies will need to rapidly enhance their operational performance to ensure that customers don’t migrate back to global brands when import transport volumes open back up. They must adjust and respond to growing channels such as e-commerce, ensure that their network designs support multi-channel fulfilment and identify more flexible domestic partners who can support transport and logistics requirements across multiple channels within various markets.

  1. Pivot to repurpose

As ongoing limitations restrict access to critical imports and high value export markets, Australian businesses must quickly respond. Not all export markets offer the premium prices that others have delivered to Australia’s primary producers – and of course, many cannot simply stop their harvests nor the creation of their primary produce.  Australian agri- food producers must plan for alternative domestic markets/segments, or else the future viability of some industries will be at risk.

Similarly, critical industries relying on imports of raw material and assets/spare parts (such as pharmaceuticals, telcos, energy & construction) will also need to diversify and reduce the over-reliance on “one” supplier or one country as the source of origin for critical inputs.

Australian businesses must build greater agility and resilience by working with partners who provide new and alternative capabilities.  The outcomes will mean a more diversified and strengthened supply chain with greater potential for risk and cost mitigation in the future.

The objective is to place the supply chain front and centre in these industries. In other words, identify by critical industries, what must change to support Australia as a self-sustaining country.

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