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Why am I so optimistic about the future—and even the current situation—of the supply chain?
An earlier segment of this post pointed out that the key disruptor in the present situation is political interference from outside. Normal supply chain operations have not failed because of any intrinsic weaknesses. They stumble because directives hobble them. Orders from authorities impose lockdowns port closures and sanctions on industries entirely capable of supplying the world handsomely with badly needed products. But although mandates from above may rain havoc, the factories and ships and trucks and workforces, the processes and tools and techniques, all remain in place and remain fundamentally sound, ready (indeed, aching) to leap into operation once that interference is lifted.
Supply processes and in themselves remain strong and ready. And, as lockdowns and sanctions more and more prove themselves to be self-evident policy failures, their vivid return seems inevitable.
I’ve also pointed out the virtual explosion in public and professional awareness of supply chains and their social and economic importance. Once an esoteric, marginal, and marginalized topic, supply chain now has an almost Trump-like purchase on media attention. The words (if not always a good grasp of the underlying principles and realities) are on everyone’s lips, and everyone from national leaders to C-level corporate executives to mothers incensed at being unable to buy baby formula following supply chain matters with more focus and intensity than ever before.
Where attention falls, action follows, and where there is demand, there follows supply. Supply chain matters were once almost taken for granted. What we now see instead is passionate global demand for improved and efficient supply chain operations. It is impossible not to see in this global demand the outlines of a radically stronger supply chain industry in days to come.
But there’s a further positive aspect of the current supply chain situation that doesn’t receive enough attention, and that is the constant expansion of supply chain capabilities and resources.
At this, you may scratch your head. Isn’t the whole problem the disruption of resources? The sanction-driven absence of energy sources needed to generate power and operate machinery? The unmined, unharvested raw materials needed to make the products? Are the stranded transportation unable to ship or move them?
When I hear this, I shake my head. No one ever asks why the other ten thousand products are on the shelves, or why items unavailable this week are back the next.
The answer is simple: because parallel to each source and service are othersources and services, and—thanks to the current crises—they are constantly growing in scope and number.
The need to respond to closures and lockdowns and sanctions has motivated businesses and the supply chain industry to develop ever more creative workarounds and ever more novel alternatives, ever more resilient response scenarios and ever wider ranges of possible sources and suppliers. The supply chain industry has more resources today than before the crises. Some may be costlier than before, and some may be more convoluted to access or manage—but some are brilliant profit-enhancing adjustments that might never have been made in less stormy times. But in every case they are there, and increasingly, they are legion.
Where direct improvements to core practices have been difficult, changes in other ways have compensated. Waste has been reduced, noise cut out, new markets or new products have been developed. Some businesses are experiencing a novel and extraordinary renewal as a supply chain perspective pushes them to new efficiencies.
We simply have more data about what we do, what we have to work with, and what works most effectively. The proliferation of SKUs alone allow us to focus on products and product distribution with a specificity unheard of only years ago. We can replicate and apply practices now in ways that achieve levels of robustness never before possible. Numerous profit-generating supply chain practices are now essentially ‘repeatable,’ enabling us to make measurable advances time and time and time again.
When old ways of doing business falter, new ways have to be found. The supply chain industry is finding them. The stark need for competitive survival mandates business creativity almost with the force of desperation. Is that battle being won? Every visit you make to a grocery store or shopping center testifies that it is. The newspapers may paint a supply chain picture of crisis and despair, but inside the industry what I see is a renewed emphasis on renovation and operational excellence in every facet. The very pressure to find new resources, new approaches, alternative options, more efficient processes is growing the resources that companies now have available. For it is quite simply that, or collapse.
I am often hired to improve supply chain efficiency; but what I am learning is that doing so under present conditions is not a matter of applying quick patches or traditional templates. It presses the supply chain consultant of today for the greatest resource of all: deeper and more imaginative responses, responses that that often lead to and involves improving business operations as a whole. Profitable innovations to the process of production are radiating outward, and are increasingly driving business innovations overall.
This deeper integration of supply chain processes with business processes as a whole, now operating across a global playing field, brings up the issue of globalization; and ‘globalization’ is a thorny topic. When I was younger, it seemed always to be presented in Utopian colors. The future would be borderless and seamless, free of national and local obstruction. We would have one government, one world, one common language (Esperanto). People and goods would flow freely everywhere.
Instead we see ourselves surrounded by a new nationalism. Globalization is seen by many as incompetent and unresponsive rule from above by an elite coterie of unelected bureaucrats. The globalist vision persists, but on the ground what the global entrepreneur finds are superpower realignments, regional conflicts, monetary uncertainty and local autarky. There is a reason I call my company ‘Kaleidoscope’: no metaphor better describes the relentless transformations and rearrangements that mark the business environment today.
But whether one favors globalization or opposes it, the fact remains that we live in a world that, on a practical level, is radically more interrelated than ever before. It is growing more so each day; and, from my supply chain perspective, that is a benefit. When one source of material closes, another opens. If one supplier or shipping service falls, others step up to take its place. Not only are the number of available resources growing, they’re almost bursting in number, for Demand generates Supply, and, after the systematic shocks of arbitrary government lockdowns and weaponized sanctions, global Demand today is all but howling to be supplied dependably.
As with so much in the supply chain world today, we have the appearance of radical resource disruption, but the reality is not only resource persistence but expansion—global expansion. Yes, a Xi Jinping may still lock down entire cities and ports, and the immediate economic consequences may still be devastating. But the underlying productivity of China is growing regardless—8.7% in 2021, in fact.
Companies too. Were you aware that perhaps the most successful company in the world, Apple, owns and operates no factories of its own at all? It designs its own software and manages its own operations and markets its own products and fills its flamboyant conferences—but its parts and products are essentially assembled by third-party contractors and suppliers.
This was a superb Lean model in a world in which suppliers abounded and supply lines flourished. It is a formula for disaster in a world where suppliers unexpectedly collapse and supply lines are closed. Why then is Apple not failing?
Because—just like the products that are still appearing on our shelves—in a global world new suppliers will constantly rise to take up the slack from suppliers unable or unwilling to adapt, and new ways to locate or exploit resources are constantly being developed. They have to be, for business survival to continue. The resilient company of today has not one but multiple backup plans and works out not one but multiple future scenarios leading to profit. This is why there is an exhilarating new intellectual excitement to profitability in the business world
This is disruption but in the best possible sense. It has driven businesses out of a comparative pre-pandemic slumber to probe an entire world of new sources, new suppliers, new distributors, new personnel, new practices, new processes, new combinations of all the above, and most of all, new ideas. For the active business, the mind knows no scarcity: only that imagination on fire can open the door to infinite resources.
The drive to access this integration of worldwide resources, physical and intellectual, is something quite separate from any need for post-democratic management from above or nationalist autarky from below. It is not a matter of ideology. It’s simply the way we work now.