How Organisations are Managing Supply Chain Risks

FTI Consulting has sponsored a survey conducted by Economist Impact, of primary legal decision-makers in North America, Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC) — the C-suite executives most likely to be in charge of a crisis within their organisation — that uncovers significant trends in how organisations are managing supply chain risks amid rising costs and the increasing frequency and severity of crises over the past four years.

FTI Consulting helps senior leaders connect their organisation’s strategy to its frontline operations. As a global business consultancy dedicated to helping organisations tackle challenges and navigate transformation.

The team provide a range of services to support clients at every stage of the business cycle — whether that is seizing opportunities for transformation or responding quickly to an unexpected crisis or fast-moving situation.

Wim Gysegom, Senior Managing Director in its Business Transformation practice, leads the operations offering across the EMEA region. 

Wim spoke to Procurement Magazine about the survey results and gave his reaction. 

Why do you think more organisations in North America and EMEA are focusing on long-term strategies compared to those in APAC?

There could be several factors at play that might explain why organisations in North America and EMEA focus more on long-term strategies compared to those in the Asia-Pacific (APAC) region.

Some of the recent supply chain disruptions have, in many cases, originated from the APAC region (geopolitical tensions, prolonged disruptions to supply chains and tariffs) but mainly affected EMEA and North American companies, providing the impetus for a greater emphasis on longer term strategies than companies from the APAC region.

On the other hand, the North American and EMEA markets are typically more mature, with slower growth rates compared to the rapidly developing APAC markets. Mature markets often emphasise sustaining growth and competitive advantage over the longer term, driving a focus on strategic planning.

In the emerging APAC markets businesses are more focused on the profitability challenges of the ‘here and now’ but will need to start shifting their attention to longer term strategies to ensure future viability in a rapidly changing world. 

Sustainability goals, while more predominant in EMEA and to a lesser extent North America, often require a long-term strategy, especially in supply chain management.

Supply chains are complex, involving numerous stakeholders and factors beyond a single company’s direct control. Although EMEA and North American companies may prioritise long-term strategies, that does not mean businesses in APAC are inactive or indifferent to sustainability. It simply might not rank as highly on their agenda. 

Why do you think nearly half of respondents in North America and slightly fewer in EMEA are prioritising investments in supply chain redundancy to mitigate the impacts of value chain crises?

Regions like North America and EMEA are likely to have been most affected by some of the recent disruptions, such as the COVID-19 pandemic, the Suez Canal blockage, the semiconductor shortage and natural disasters. These events have exposed vulnerabilities in global supply chains, prompting businesses to reassess strategies and build redundancies to improve  resilience.

By enhancing their ability to absorb supply and demand shocks, companies are better able to maintain operational continuity during crises, which will reduce their overall risk profile. 

In response to geopolitical tensions and supply chain disruptions, a growing number of Western companies are adopting a China plus one (C+1) strategy. This involves diversifying manufacturing and supply chains by establishing operations in countries other than China.

This not only mitigates that risks associated with over-reliance on a single country, trade barriers, tariffs and political instability but can also serve as a competitive advantage. By improving product availability and responsiveness to market demands, companies are better placed to meet the changing needs of the consumer, who increasingly expects products to be available immediately.

How can people improve their supply chains?

There are multiple ways to improve supply chains and while technology is a crucial enabler of supply chain excellence, it needs to be balanced with a well-designed strategy. Advances in Artificial Intelligence (AI) and Machine Learning (ML) have opened the door to unprecedented levels of insights and foresight in supply chain risk analysis.

Many companies are now using Digital Twin — virtual models of their supply chain — to benefit from real-time tracking and monitoring of inventory and shipment statuses. This enables businesses to anticipate delays, make informed decisions, run a multitude of scenarios and simulate disruptions in their supply chain, such as raw material shortages, route constraints and supplier disruptions.

These digital twins create end-to-end visibility of the supply chain, which is crucial to not only understand the risks they are facing but also allow companies to make informed decisions that adapt plans to maximise profitability despite the constraints of a situation. 

The ongoing focus on the next generation of technology often overlooks the fact that having streamlined standardised processes, skilled people and strong supplier relationships are as important as tools such as Advanced Planning System (APS) or supply chain management optimisation software.

More traditional levers, such as strengthening supplier relations, create strategic partnerships and diversify the supply base will continue to play a crucial role. Sourcing from multiple vendors in different geographic locations reduces single supply dependency, which minimises risks. While nearshoring or reshoring suppliers can reduce lead times and transportation costs. 

Supply chain optimisation is not a once-a-year task. It requires continuous monitoring, reviewing and adjusting of the supply chain processes in response to changing market conditions and consumer preferences. Cultivating a culture of continuous improvement and innovation within the supply chain team is essential.

Companies should look to embrace the latest technologies and leverage predictive data analytics to create foresight and make informed decisions about procurement and supply chain investments. 

Why are tools like end-to-end visibility so important?

The key advantage of the end to end visibility is that it enables companies to make informed real-time decisions in response to demand fluctuations, disruptions and other changes. This visibility also allows companies to identify bottlenecks, inefficiencies, potential risks and vulnerabilities, enabling operations to be optimised and streamlined, thereby reducing disruptions.

Ultimately, this enables companies to reduce costs associated with excess stock, expedited shipping and inefficient resource allocation, driving improved profitability. 

A prime example of this is the automotive industry during the semiconductor shortage. Some OEMs introduced fully digitised supply chains with compulsory “two-way” visibility between them and their suppliers. This improved their ability to forecast parts availability and adjust the production to maximise output, customer satisfaction and overall profitability.

It also improved and strengthened collaboration and relationships with their suppliers. In today’s fast-paced business environment, E2E visibility provides the information companies need to quickly pivot their strategies, whether that means adjusting inventory, or altering supplier relationships in response to evolving market conditions.

What do you think the results of this survey will be in 12 months time? 

In the coming year, I think we will start to see more APAC companies adopting long-term supply chain strategy and expand their presence on the global stage. Historically, global supply chains were dominated by multinationals, but countries like China and Korea have been busy establishing leadership in critical sectors , such as battery cells, semiconductors and EVs.

This stems from years of planning, however its relevance has become more apparent as volumes and demand are scaling. It is a shift that highlights the importance of forward-looking strategies to ensure companies remain competitive and don’t get left behind.  

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