Building agile supply chains in a VUCA world

2018 has only just started, but things are pretty much in full swing when it comes to major developments:

• The Dow Jones index also experienced a drop of 4.6% early last week (February 5), which was the biggest drop since 2008 (Remember Lehman?)
• The political climate continues to be tense, even as we come together to celebrate sports during the Winter Olympics in Pyeongchang, we still bear witness to the tense moments in Asia

VUCA stands for Volatile, Uncertain, Complex and Ambiguous. A term that has its roots in the '90s by the US Army, but one that resonates deeply into the new millennium. The world today is no longer the one that our parents lived in, where one can reasonably predict how life would pan out (so long as you accomplished certain milestones / met certain criteria).

The Harvard Business Review summarized what VUCA challenges means, and how best to approach each aspect. I've also attempted to summarize some of key challenges facing supply chains based on my own experiences below:

Some points to note:

1. The key focus for any supply chain professional/leader, is to ensure a stable supply flow of products and creating value. A good summary of these objectives in Supply Chain Management (SCM) can be found here.
2. VUCA can be seen as part of mega-trends which are sweeping the world. Mega-trends, as the name implies, can come and go, but they have the ability to impact the supply chain in a way that makes it challenging for managers to maintain the SCM objectives mentioned earlier.
3. Regardless of VUCA factors, supply chains are becoming increasingly complex, with multiple partners and multiple tiers of suppliers and downstream vendors. The lack of visibility alone would add to the problems associated from such mega-trends.

As a project professional, I've seen how the concepts of project management has tried to adjust to these changes as well. From a well defined "stage-and-gate" process, to one that is more iterative and agile, it is important that we adapt quickly before the competition or environment consumes us.

Agile Project Management (APM) is more an approach rather than a methodology, it requires a change in mindsets towards collaboration, building on the team's collective responsibilities to deliver on results. Agile projects are more built up over time, and with each phase it brings it closer to achieving the overall project objectives.

So how does one build an agile supply chain?

The PMI worked with the Agile Alliance® in their publication of the Agile Practice Guide, which covers a number of areas that could be applied to a VUCA environment.

Tackling Volatility in Supply Chains

Given that the pace and trends that are being set, it is often futile to attempt a large scale fixed requirement project or having a supply chain that only meets those requirements. Rather, it is important to focus on the bottom line of "what does the customer want" and to focus on delivering small wins.

An example of this would be the case of food delivery services today. With the advent of food courier apps like UberEats, Deliveroo, FoodPanda, etc, the "traditional" supply chain of takeaway food is surprisingly not about having a wide delivery network. If we go back to the customer's basic wants (which is simply to have hot food of their choice served to them), the algorithms can be tweaked to focus on the time taken for food to be prepared, the distance traveled by the couriers, and the technology required to keep food hot.

Tackling Uncertainty in Supply Chains

A key element of uncertainty is how a new element that is introduced, may impact the overall efficacy of a supply chain. This ties in closely with technological advances (disruption), where many companies initially struggle to determine the full impact of the new technology's introduction on the business.

Consider ride sharing apps and the impact it has on transportation, or how mobile payments (as part the new wave of FinTech) has changed the landscape of financial services. Supply chain leaders should consider building an innovation function within their teams, to quickly assess and analyze ways of adoption.

An example of how this can work in the maritime industry where I have been based: The same algorithms that Uber uses to match supply of vehicles to meet demand, can be used in the same way to match vessel tankers to cargo owners. Pricing of freight can be determined based on the same surge principles too (which is the case when your friendly shipbroker tells you about "supply of ships are tight due to ... [insert reason here]"). The same principles that govern blockchain could lead to "smart" charter parties, one where we remove the complexity and hassle of trying to negotiate the optimal terms for carriage. Even maritime insurance risk can be pooled and automated, based on the same travel algorithm and big data now made available, allowing shipping companies to better manage their risk profile in trading their vessels in the market.

These are just some ideas of innovation, which as part of an adaptive/iterative cycle, can be part of a small deliverable in a larger change/strategic project.

Tacking Complexity in Supply Chains

Macro factors that I have listed above will not go away. How we deal with it, becomes the key to dealing with the complexity as a result of such trends.

In addition, there is the often unspoken issue of complexity WITHIN the organization as a result of trying to deal with the external factors too. Stakeholder management alone may not be sufficient, if there is too much "noise" within the organization on how best to move forward.

It is interesting to note that the Agile Practice Guide dedicates sections on building an agile environment within the organization/project team, from the discussion on servant leadership, to finding purpose in the things that we do.

To this, my favorite question to ask... "WHY"

For those who have yet to learn about the Golden Circle, I would encourage you to learn more from Simon Sinek and his team to understand the organizational "why statement". It is a powerful way for organizations and its leadership to know what drives the company and its purpose. Individual staff and teams would also be able to identify themselves to their own "WHY", in order to achieve the alignment on advancing the company's goals.

In the case of supply chain, consider the S&OP process and the stakeholders involved (Manufacturing, Sales/Marketing, Supply Chain). With a more complex supply chain, the S&OP process may become convoluted to the extent that people forget why these supply chains were designed/created for (servicing the customer/markets).

Tackling Ambiguity in Supply Chains

Ambiguity stems from the unknown, and the challenge then is how to discover those "unknowns". In addition, navigating through ambiguous relationships within the supply chain means that supply chain leaders needs a proper communication management/framework to ensure that everyone (not just stakeholders), are aware of the changes that are happening on the ground.

Linking back to my earlier suggestion on innovation within the supply chain department, it is the same innovation that drives the need to connect the dots and to ascertain if these seemingly unrelated points may tie back to something bigger. I'd recommend reading this book "Know What You Don't Know" as a good primer.

Conclusion

The world will continue to be a VUCA one, but rather than keeping still and wistfully wishing for the "good ol' days" of yesteryear, we need to evolve and adapt to embrace change towards a more sustainable future (and by that, I mean a more sustainable supply chain!)