The Covid-19 pandemic revealed key differences between “fit” and “fragile” supply chain organisations with regards to how they deal with disruption, according to Gartner.
The most fragile focus on short-term survival, while the fittest supply chain organizations see disruptions as inflection points to improve the value that supply chain provides to the business.
“Disruption is not a short-term situation, but a long-term trend that will most likely accelerate as we face climate change impacts, global power balance shifts and more,” said Simon Bailey, senior director analyst with the Gartner Supply Chain practice. “In the future, disruptions will occur more frequently and supply chains must be able to deal with whatever is coming next. Some supply chain leaders have understood that already and prepared their organization accordingly.”
“Fit” supply chains are able to move ahead of the competition after dealing with the high-impact events, while “fragile” supply chains fall behind.
Fit Supply Chains Focus on Structural Shifts
For fit supply chains, the most impactful disruptions are those that involve fundamental, structural shifts in the context in which the supply chain operates, such as new technologies and changing competitive dynamics.
By contrast, fragile supply chains find operationally focused disruptions — such as demand and supply shifts — to be most impactful. While focusing on these operational challenges, they lose sight of their long-term goals and overlook how structural shifts could help them maximize the value and thus they fall behind the fit supply chains.
“It’s not the type of disruption that determines the supply chain impact. The type of supply chain determines the impact of the disruption,” Bailey said. “Fit supply chains excel at focusing on the structural disruption and proactively translating those into competitive advantage. They are able to change their organisational design to capitalize on structural shifts and create new value for their customers.”
Fit Supply Chains Maintain Their Long-Term View and Investments
One of the most visible differences between the approach of fit and fragile supply chains to disruption is how they treat their long-term strategies and investments. Most fit supply chains maintain focus on the long term and preserve strategic investments during disruptive events, while fragile supply chains prioritise current-year performance and cut strategic investments.
“During a disruption, supply chain leaders should try to avoid emergency cost cutting that put both short- and long-term effectiveness at risk. Instead, cost optimisation should be an ongoing effort in the supply chain and cost decisions must take all the operating outcomes across fulfillment, reliability, risk and growth into consideration,” Mr. Bailey concluded.