Supply chains have always mattered in retail, but not like this. Credit the chaos and disruption caused by the pandemic for elevating supply chains to their new status as a source of strategic advantage and enabler of value creation rather than the narrower role involving the movement of goods.
This was a recurring theme at Gartner’s recent Supply Chain Symposium/Xpo, an event billed as “the world’s most important gathering of CSCOs and senior supply chain executives.” Held in person for the first time in three years, more than 2,500 attendees gathered at the Walt Disney World Dolphin Resort near Orlando in early June for three days of discussion and presentations from Gartner analysts focused on what’s next for supply chains.
What’s an Offset Strategy?
The Gartner event took on special significance this year as supply chains remain disrupted and professionals from every industry vertical who were in attendance are seeking answer about the optimal path forward. There aren’t any easy answers, but the Gartner analysts who presented at the event shared unique views of the future that have application for retailers of food and consumables and for their suppliers. Most notably, Ken Chadwick, VP Analyst at Gartner, described “Supply Chain’s Offset Strategy: Recalibrating Our Approach to the Great Acceleration” during an opening keynote session.
“An offset strategy is one that is designed to counteract a force you cannot control and with traditional strategies you wouldn’t win,” Chadwick said. He likened the approach to the martial arts philosophy of using an opponent’s weight against them. “It’s time to stop coping. It is time to act to get ahead of accelerating change.”
The way to do that is employ an offset strategy focused on five key challenge areas affecting the supply chain: cognitive overload, evolving customer expectations, technology change, supply chain cyber-risk and energy instability. For example:
- Cognitive overload: Increasing supply chain complexity is expected to continue, requiring organizations to make better, faster decisions with technology. Leaders have an obligation to simplify with a less-is-more approach, according to Chadwick. “Several leading companies are constraining decision-making using technologies such as AI and machine learning. They are offsetting the challenges of complexity of decision-making and planning processes by implementing AI and machine learning to shift the burden of decision making from humans to computers.”
- Evolving Customer Expectations: Pandemic pressures revealed the shortcomings of a decades-long focus on functional efficiency performance optimization made possible by a stable operating environment. “We believe that just-in-time is no longer a core plot line to our supply chain hero story,” Chadwick said. Supply chain leaders must shift to a “Just the Customer” mindset, focusing externally on customer needs to deliver optimization as well as business growth.
- Technology Change: The biggest challenge facing supply chain leaders in the technology space is embracing and adapting to new technologies and envisioning new ways of doing business. Gartner sees accelerating trends in areas such as autonomous things, digital twins, analytics everywhere and ecosystem collaboration. “These are all innovative technologies that can help us run our supply chains, but our history in getting the most from our technology isn’t great,” Chadwick said. He stressed that chief supply chain officers must be at the forefront of change and inspire their employees to use and trust the next generation of technology to be on the right side of the widening digital gap. “Those who are ahead are getting farther ahead and those who are behind are getting farther behind,” Chadwick said.
- Supply Chain Cyber-Risk: A disturbing 80% of companies have experienced a significant cyber security incident, according to Gartner research. Supply chain leaders can react to this evolving risk by partnering with CIOs to build a cyber security framework. “CSCOs cannot control if, or when, they get hit by a cyber-attack. What they can control are their own decisions on investments and actions,” Chadwick said. “Supply chain leaders must realize that cybersecurity is not just an IT issue. It includes making decisions on partners, conducting realistic risk assessments, and integrating a cybersecurity perspective into everything they do.”
- Energy Instability: Reliance on centralized and singular sources of supply can expose supply chains to failure and is an area of risk leaders must address. The energy instability trend is accelerating, which means a diversified approach to energy is needed where the power demand of factories, fleets and stores is supplied by a distributed network of renewables, micro grids, and battery storage, according to Chadwick. The benefit is less reliance on large utilities and the creation of redundant sources of cleaner energy closer to the source and coordinated with the need.
Within each of these five areas, Chadwick cited examples where the offset strategy can be effective for supply chain leaders who employ a “sense, shift, steer” approach. The sense portion requires understanding the context and problems confronting the business, before shifting to unconventional, underinvested, or untried actions and then steering a new course to value.
Retailers and consumer goods companies will have plenty of opportunity to put Gartner’s offset strategy and sense, shift, steer framework to use in the years ahead. A consensus at the event was that the frequency and magnitude of supply chain disruptions are expected to increase.
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