Choosing Suppliers

Resilient organisations make hay when the sun shines

6 min read

31 December 2018

Supply chain risk is often thought of only in terms of how their failure could disrupt your operations. But what do they do if you fail, asks Sungard's Sandra Bell.

In the modern inter-connected world, localised operational disruptions, often caused by relatively mundane incidents such as power failures, flooding or fire, frequently create more than just a small problem to the operations of a single business.

Many trigger a ripple effect that is felt by others: employees, clients, shareholders, regulators, media and suppliers. Even relatively minor disruptions now frequently upset the wider, delicately balanced commercial web in which organisations operate.

This is particularly acute in the service sector – think of the carnage that has now become commonplace following small IT glitches in both the airline or banking sectors.

Suppliers, stakeholders and customers are now almost immediately aware when something happens to your business through channels such as social media and can, and will, take action to cut you out of their global supply chain if they think you are a risk.

Competition is fierce, and no one is completely irreplaceable. Think of a football player who is substituted off the pitch, never to be brought back on again.

Like them, you won’t want to give others the chance to prove that they can do the job better than you.

Turning the tables

Business Continuity teaches us to minimise our supply chain risk by having multiple suppliers for key products and services. It has also become common practice to try to further reduce risk by arms-length contracting and “incentivising” supplier performance with hefty fines for non-delivery.

These are both excellent strategies if all you want to do is “survive” a disruption. However, the modern consumer, who has access to the global marketplace, is no longer satisfied to wait for an organisation to execute a heroic recovery and will vote with their feet at the first sign of trouble.

Organisations therefore need to be able to “thrive” despite uncertainty and disruption – and to do that they need friends.

The key ingredients

So, what are the three key ingredients to being able to thrive? First, you want to be adaptive, knowing when to change and optimising yourself to the outside environment. Leadership is also crucial – with leaders instilling in people the will to succeed.

The third and final area – one which is frequently neglected by organisations – is their network.

Forging and maintaining effective relationships with stakeholders, customers and suppliers is a key component to not simply being able to maintain successful operations but also competitive advantage, profit and growth.

Working with your suppliers

How can organisations move from arms-length adversarial relationships to one where they are mutually supportive without placing themselves at undue risk? The first thing to do will be assess the value that is in each relationship.

For example, is value measured simply by the commercial contribution that each person makes?

If that’s the case the relationship will only be safe when hard value is being provided.

In contrast, closely coupled networks, where parties help each other out when things go wrong, will be more resilient. Highly collaborative relationships where knowledge and insights are shared mean that people will think twice about dropping you like a stone when things go wrong.

Here are five steps organisations should take to strengthen their network and boost resilience.

1) Analyse how much flexibility and agility your relationships have in them

Flexible relationships should be joint and supportive rather than adversarial. And if your organisation wishes to be resilient, you won’t just look at your risks, but look at how the risks of the entire value chain is best shared among its players

2) Communicate risks, issues and near misses to your network

Speaking to your suppliers, vendors and customers at the earliest stage possible when something goes wrong demonstrates foresight, agility and integrity – and will help you to avoid ‘trial by twitter!’

3) Work on joint future products and services

This signals to the rest of your network that you’re investing for the future, and are not just in it for the profit

4) Understand that relationships are a strategic issue

This will need to be acknowledged on a company-wide level. Relationships can be existential, and this message needs to be elevated to board level

5) Wargame

When multiple organisations respond together, things get complex. You wouldn’t dream of entering a team into a football tournament where the first time the players meet is on the pitch. You should therefore learn how each other responds to disruption by wargaming together before you have to do it for real

Weathering the storm

Thanks to social media and the connected nature of our world, there is no such thing as an ‘isolated incident’ anymore.

While in the past, organisations strove to contain incidents, this approach doesn’t cut it any more. Your organisation, and all members of the “commercial web” you sit within, have a vested interest in ensuring every other member succeeds.

A truly resilient organisation will invest in building strong relationships “while the sun shines” so they can draw on goodwill when it rains.

Sandra Bell is head of resilience at Sungard Availability Services.