Looking back at 2021, the growing supply chain disruptions provided plenty of challenges—and correspondingly valuable learning opportunities—for 2022 and beyond.
While COVID and pandemic-related issues may have dominated the headlines in 2021, one of the biggest issues to emerge in the last 12+ months is the significant and ongoing supply chain disruptions that now seem to be a challenging and semi-permanent feature of the global landscape for the foreseeable future.
For business leaders and decision-makers, adapting to the reality of a newly fragile and fragmented supply chain is critically important. That begins by getting a better understanding of the scale and scope of the problem, as well as the effective lessons learned from 2021, and developing strategies for supply chain resilience.
Crime wave stresses supply chain
The supply chain delays, disruptions, and logistical issues are adding to the complexity of what was already happening from a security standpoint: a significant spike in criminal activity. Organized crime has become more aggressive at diverting, short-shipping, and simply stealing everything from raw materials to finished products. From diapers to electronics, the black market in stolen goods is as active and lucrative as it has ever been. The other challenge organizations are grappling with is a significant and perhaps unprecedented increase in counterfeiting. From alcohol to luxury fashion and accessories, counterfeit goods are flooding the market. Not only do inferior knockoffs cause direct damage through loss of business, they have a cascading negative impact on warranty programs and brand perception. In that context, the losses from counterfeit goods can very quickly elevate from problematic to catastrophic. And it isn’t just those who directly ship or import goods who should be concerned, but anyone whose business relies on the movement of goods and materials.
Operational lessons learned
Against the backdrop of 2021’s supply chain challenges, savvy business leaders have learned important lessons about what to prioritize when it comes to securing their supply chains, mitigating the impact of losses and disruptions, and safeguarding their operations:
Ditch the just-in-time inventory approach
On the supply chain logistics side, the increasingly popular practice of just-in-time shipping and “smart” inventory, which can introduce efficiencies and reduce costs, is actually somewhat of a liability when the supply chain becomes unreliable. For the time being, more decision-makers might be wise to move away from that model and plan to have a significant volume of safety stock on hand. While that's likely to be more expensive in the near term as inventory carrying costs go up, the ability to withstand supply disruptions and continue operating smoothly is likely to be a better bet to protect your bottom-line interests.
Build your team
From a loss mitigation and business continuity standpoint, developing a robust and effective supply chain security resilience strategy is essential. That starts with assembling a trusted and experience team of security professionals. Organizations should make sure they have a structure in place that allows for close coordination and a steady and seamless exchange of information between security, purchasing, and supply chain management professionals. That coordinated structure and clear communication is even more important when working with an experienced outside security partner.
Identify critical supplies and suppliers
A disruption to the flow of critical parts should send a lightning bolt through the system. Security experts recognize the critical importance of understanding the unique landscape of threats and vulnerabilities that inform an organization’s supply chain risk profile. With that in mind, your security team should work closely with purchasing and logistics professionals to identify critical suppliers and essential products and build both a profile and a plan for how to respond quickly and efficiently when things go sideways.
Establish internal auditing and reporting protocols
Because there is an enormous amount of pressure on the system right now, and because the financial incentives for crime are so rewarding, the threat from insiders is one of the most pernicious and potentially damaging. Individuals involved in supply chain and logistics are being offered bribes and incentives to help divert products or modify inventory figures, and organizations need to be especially rigorous about things like background checks and security monitoring. Make sure you have both a professional and a formal reporting process by which employees feel empowered and able to confidentially report any attempts to influence their behavior or to violate the company code of ethics.
From an organizational risk perspective, perhaps the single biggest key lesson learned from the past year — and something that business leaders can apply moving forward — is the value of preparation. Those rare organizations who were truly prepared to manage a pandemic-level disruption have withstood the supply chain issues in their particular industries with much less disruption and damage than many of their competitors and are much more resilient now to the ongoing supply chain challenges. Those without processes and protocols in place have largely been reactive and have been forced to play catch-up.
Take it seriously
Finally, and perhaps most importantly, take security, risk mitigation, and business continuity planning seriously. The supply chain crisis was a blind spot for far too many business leaders. Together with the pandemic, it’s clear now for anyone that didn’t realize it before that the unthinkable can happen, and you need to be prepared. Crisis management, coordination, and supply chain security are clearly among the most critical capabilities a company must develop and preserve. Avoid patchwork solutions. Instead rely on a comprehensive, systematic, and detailed holistic plan. Make sure you not only have a plan in place, but a strong team and a genuinely resilient and adaptive decision-making process to manage what will inevitably be the dynamic and often unpredictable crises in the future.