It’s late May 2020 which means there’s a lot of commentary about how the COVID-19 crisis will impact global supply chains and the contingency planning reviews that will need to happen. Most of it centres on ‘resilience’ and what companies should do to deal with a similar, and perhaps even more prolonged, situation in future. If we work from the basis that resilience is best described as being both an ability to ‘bounce back’ from a disaster and to adapt, shouldn’t we be putting some distance between definitions and expectations of resilient supply chains versus alternative supply chains?
Since 2010 Ecodesk has worked with major corporations to embed sustainability into their supply and, through various projects, we’ve got to know what a resilient supplier looks like. They’re not cash-rich monolithic enterprises. For the most part, they’re SMEs who have to think and act innovatively. They’re typically lean and operationally efficient without the weight of multiple layers of management bureaucracy to slow them down. That makes them, almost by default, highly agile and more capable of adjusting their processes to respond alternatively in times of crisis. We also find that their agility often masks a deeper, more organic set of processes that behave in response to a surprising number of ESG variables. A sustainable supplier is, therefore, almost certainly a more resilient one – sustainability forces you to think about a wide range of aspects and impacts on your business. You need to consider the implications of inefficient resource consumption, circularity, energy use, working conditions, product lifecycles and all the while keep innovating your business processes and your products. Whilst it may not be obviously contained under the heading of ‘sustainability’, empirically we’ve seen that suppliers have adopted measures independently which has made them more resilient. However, there still remains a lot more that can be achieved in the delta between customers and suppliers.
The primary focus areas for the majority of buyers are – understandably – price, quality and delivery. No business can afford to overlook this in its procurement processes. Simply shifting purchasing from one supplier to another represents a very weak proxy for resilience, after all in the case of a pandemic or other global issue (one could immediately draw parallels to climate change) everyone gets affected. Here are some supply chain sustainability steps you might consider building into your supplier ‘resilience’ strategies;
- Put resilience first. Strong suppliers tend to show signs of deeply embedded resilience supported by leadership that champions such an approach. Suppliers tend to respond positively to having robust leadership which can inspire and chart a clear path toward greater resilience. They will, in turn, reward the investment through contribution to innovative thinking and solutions provision. You need a strong business case that promotes resilience in your own organisation first and foremost;
- Roadmap your resilience strategy. Once you’ve got a clear vision for what resilience means to your business don’t be afraid to share it with your suppliers. They are expecting you to have thought about most, if not all, eventualities and the implications for them. If you haven’t, then say so! If you have, and you want to bring them on the journey of preparation and asking them to underwrite your operational risks, then be prepared to openly talk about timelines, resource allocation, shared ownership and actions. Above all, make sure you are able to illuminate the way forward!
- Help suppliers with management proficiencies. Understanding your suppliers’ levels of management proficiency and awareness can unlock a powerful discovery process in which emergent risks and opportunities can begin to reveal themselves. Continued evaluation of managerial proficiencies also stimulates ‘habitual resilience’ in which leaders strive to avoid complacencies and embrace the challenge of innovation. Asking your suppliers to disclose their sustainability maturity should be a key part of your resilience strategy. In screening prospective suppliers, our clients see a clear correlation between suppliers who score highly on ESG indicators and those who put forward the most compelling RFP responses;
- Build transparency through collaboration. Team-up with your supply base to help create an open space in which shared culture, mutual respect and exchange of ideas can be truly fostered. It can take a lot of effort to maintain but becomes very rewarding as suppliers edge away from feeling threatened to an area where equality and respect are normalised and collaboration provides upside benefits and downside protection. Suppliers want you to know that they respond to assurances and will develop their organisational cultures to fit your expectations where there is mutual respect;
- Invest time, resources and money into your suppliers. Simply paying their invoices will not be enough to then expect them to back you in a time of crisis. Even with high degrees of agility, suppliers will need to consider who to support when their resilience is tested. Supplier investment can take many forms. However, the most appreciated of all we’ve found is open, honest dialogues and providing real-world materials and resources (e.g., training, collaboration tools) that enable them to advance their maturity. Your suppliers aren’t necessarily expecting this for free but they are expecting it to bring them some value-add. Remember that your suppliers often possess better skills than you and do not welcome a top-down patronisation of their status;
Building resilience is not an overnight task, it takes patience and commitment. The world is becoming increasingly exposed to new risks and now is the chance to build a different type of resilience – one which is not necessarily about being able to switch between suppliers but one that embraces collaboration. A prosperous global economy requires us to tackle the cause rather than respond to the effect and make good use of the information that exists around us.
Resilience means embedding a ‘can do’ attitude amongst teams who are well equipped to deal with the ups and downs of an uncertain existence. This makes them, almost by default, highly agile and more capable of adjusting their processes. They don’t suffer from multiple layers of management bureaucracy or complex, multi-stakeholder strategies. As a result, they probably provide the best possible opportunity for large enterprises to be the vanguards of “build back better”.