Fit supply chains will thrive in the face of continuing disruption, while fragile supply chains will fall behind.
According to new analysis from Gartner Inc., the COVID-19 pandemic has revealed key differences between “fit” and “fragile” supply chain organizations with regard to how they deal with disruption. The most fragile supply chains focus on short-term survival, while the fittest supply chain organizations see disruptions as inflection points to improve the value that the supply chain provides to the business.
For fit supply chains, Gartner says the most impactful disruptions are those that involve fundamental, structural shifts in the context in which the supply chain operates, such as new technologies and changing competitive dynamics.
By contrast, fragile supply chains find operationally focused disruptions, such as demand and supply shifts, to be most impactful. While focusing on these operational challenges, they lose sight of their long-term goals and overlook how structural shifts could help them maximize the value, and thus they fall behind the fit supply chains.
“It’s not the type of disruption that determines the supply chain impact. The type of supply chain determines the impact of the disruption,” said Simon Bailey, senior director analyst, Gartner Supply Chain. “Fit supply chains excel at focusing on the structural disruption and proactively translating those into a competitive advantage. They are able to change their organizational design to capitalize on structural shifts and create new value for their customers.”
According to Gartner, one of the most visible differences between how fit and fragile supply chains approach disruption is how they treat their long-term strategies and investments. While most fit supply chains maintain focus on the long term and preserve strategic investments during disruptive events, fragile supply chains prioritize current-year performance and cut strategic investments.
“During a disruption, supply chain leaders should try to avoid emergency cost-cutting that put both short- and long-term effectiveness at risk,” said Bailey. “Instead, cost optimization should be an ongoing effort in the supply chain and cost decisions must take all the operating outcomes across fulfillment, reliability, risk and growth into consideration.
“Disruption is not a short-term situation, but a long-term trend that will most likely accelerate as we face climate change impacts, global power balance shifts and more,” concluded Bailey. “In the future, disruptions will occur more frequently and supply chains must be able to deal with whatever is coming next. Some supply chain leaders have understood that already and prepared their organization accordingly.”