Gartner: Supply Chain Disruption Shaping Creates Competitive Advantages

July 20, 2021

Chief supply chain officers (CSCOs) must strategically reduce the rate of disruption to their supply chains by reducing their surface areas, according to Gartner. Research by Gartner shows that disruption-shaping organizations are likely to experience less than one-third of disruptions than their peers.

Gartner defines supply chain surface areas as the sum of all the products, processes and networks that compose the supply chain today and represent touchpoints that risk events can have with the supply chain.

“CSCOs should reduce the surface areas of their supply chains by simplifying processes, reducing movement within their supply chains, and reducing the number of sites and suppliers that compose their networks,” said Suzie Petrusic, director research with the Gartner Supply Chain practice. “With a higher cadence of risk event, a smaller surface area is an asset, a large surface a major liability. CSCOs can’t control how many risk events will happen, but they can control the size of the target they want their organization to be.”

Many supply chains are easy to disrupt because they pose a large target. They expanded over decades and dispersed risk across a global network, while optimizing cost. Processes became more complex and required a lot of movement of goods and material within the supply chain – a system that is easy to disrupt.

Supply chain organizations that experience fewer disruptions today have managed to control the surface areas of their supply chains by constraining the number of touchpoints risk events can have with their organization. This means fewer third-party logistics providers, shipping modes and lanes as well as greater distances between suppliers, factories, warehouses and distribution centers. Processes are being redesigned and simplified.

“Disruption shapers balance exposure to the overall risk environment with exposure to single catastrophic risk events. The goal is not extreme consolidation but finding the right size for the organization at any given point in time,” Petrusic added.

Disruption Shapers Embed Disruption Awareness into the Overall Supply Chain Strategy

For disruption shapers, reducing disruption is a part of the strategy planning process, considered along with cost, quality and speed. However, this does not mean abandoning the strategic business objectives of past decades. Instead, CSCOs can redefine cost optimization by including the cost of constant disruption in their calculations.

“A commitment to an optimal surface area does not mean that you can never expand. It just means that CSCOs have to make intelligent design choices that diversify the total risk,” Petrusic said. “They must understand that the current environment will make it harder and harder to deliver reliable and profitable service to customers, and they should act now to experience less disruption later.”

Disruption Shaping Reduces Costs and Creates Competitive Advantages

Disruption-shaping organizations benefit in multiple ways. Their approach reduces costs to the supply chain because the organization experiences fewer disruptions overall. When a disruption happens, the network is more likely to be prepared and recovery will take less time.

"The biggest benefit of this approach is the competitive advantage it creates. Disruption shapers are ready and waiting to service the customers that their closest competitors are losing because they are too busy responding to risks," Petrusic concluded.

Ken Bays, Vice President Product Development with Inmar Intelligence said, "I believe disruption-shaped supply chains are somewhat situational. Fewer touchpoints certainly reduce complexity – but it can also restrict agility when events do occur. Borrowing from ISO 31000 Risk Management protocols, risk management begins with communication and consultation. Next is establishing the context. This is where risks become situationally based. For example, let us assume Car Company A owns its fleet of new vehicle carriers – and due to the shortage of available computer chips – the company plans to idle or reduce production in its plants indefinitely. This leaves these hard assets stagnant until sales return to their previous levels.

The secret to disruption-based supply chains is limiting it to the company’s core line of business - in this case - manufacturing and selling vehicles. The non-core functions should have near- frictionless integration driven by technology that facilitates visibility and incorporates prescriptive and predictive analytics."

Bob Bova, President and CEO of AccuSpeechMobile added, "Gartner continues to get organizations to align themselves with technologies that can optimize processes, use resources in the most effective manner and define risks before they occur. AccuSpeechMobile provides edge based voice automation that can minimize risk by voice automating workflows. This type of automation accelerates work, eliminates errors and assists in reducing the supply chain surface areas for companies of all sizes. This compression of solutions will allow companies like AccuSpeechMobile to thrive by providing multiple applications with voice automation thereby reducing their supply chain surface area."

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