What is Supply Chain Resilience, Really?

New procurement model needed to alleviate supply chain challenges

As any procurement professional could tell you, supply chains are complex systems with far-flung geographies, multiple inputs and outputs, and hundreds, if not thousands of actors across different organizations all contributing to build something that is greater than the sum of its parts. So creating a comprehensive list of risks that might impact these complex systems — and then managing them — can be an impossible task.

Most supply chain management literature approaches supply chain resilience using a traditional risk management framework, assuming that all risks can be known, understood, predicted, and managed. Resilience, then, is an organizational trait. A resilient company — a single entity within a supply chain — should have a series of plans in-hand to mitigate any possible risks within their supply chain. This super-human preparedness would allow them to respond to any changes and maintain a stable, permanent equilibrium; to "snap back" to "normal" after any disruption.

After multiple years of continuous disruption, however, this approach no longer works. Highly improbable, statistically random events with far-reaching consequences are now increasingly common. A global pandemic, a steamer stuck in the Suez Canal, unprecedented weather events, and, now, rising inflation and looming economic uncertainty continue to influence supply chain systems around the world.
 

How, then, should we define resilience in this changing world?

Embracing Ecological Resilience 

Recent research proposes a new understanding of supply chain resilience — social-ecological resilience — that describes a supply chain's ability to "persist, adapt, or transform in the face of change." This definition encompasses the evolving nature of global supply chains, and indicates that those who want to grow and thrive despite continuous disruption must embrace change as their only constant.

This model defines supply chains as a combination of both social actors and ecological realities, and recognizes the complexities inherent between the two. In this model, an organization within a supply chain recognizes its limitations and does not try to control its supply chain, nor does it try to define a hypothetical optimal state and strive toward it. Rather, it achieves resilience through continually renewing, reorganizing, developing, and experimenting. In practice, this means responding to risks in the moment, while leveraging the experience to learn, adapt, and grow in the long-term.
 

Investing in Partnerships

Embracing a theory of complexity when managing supply chains means recognizing that a single individual within a single organization can only have a limited impact. For an organization to respond quickly in the face of risk, they must empower their employees to make quick decisions and experiment when necessary.

This does not mean loosening standards or risking compliance with internal policies and procedures. It means investing in the technology, systems, and training that empower procurement and purchasing teams while protecting the long-term interests of the organization. It means increasing spend visibility and improved reporting that drive better decision making, enabling long-term partnerships, growth, and resilience.

For example, Honeywell leveraged digital solutions from Amazon Business to integrate and automate its purchasing process, empowering employees while maintaining spend visibility. “Our employees are empowered to make purchasing decisions, because while procurement is still part of the process, we’re not part of every transaction,” says David Canales, Honeywell’s digital procurement manager.

“Amazon Business allows us to have great reporting, which helps us identify opportunities. And we can use it across all our businesses, through a purchase order or a p-card, opening up a larger population of people who can access procurement tools.” These solutions allow Honeywell to react quickly and keep operations running smoothly, particularly in areas of safety.

These tools helped Honeywell at the outset of the coronavirus pandemic, allowing the company to respond quickly to the needs of its essential workers. Face masks, safety glasses, and thermometers were critical — and often hard to find — and demand remained strong for more traditional safety equipment like hard hats and gloves. Honeywell manufactures many of these products, which are available on Amazon Business. With Guided Buying, Honeywell was able to steer purchasers to those preferred goods, as well as the wider range of Honeywell products, as it could ensure their availability, quality, and safety in a time of need.

Canales specifically notes the usability of Amazon Business, stating that employees at Honeywell are accustomed to making purchases on Amazon in their daily lives. Amazon Business provides the same type of easy buying experience, removing friction from the purchasing process and allowing employees to make quick, agile purchasing decisions.

In further example of continuous innovation, the partnership with Amazon Business has meant Honeywell can work directly with Amazon to forge stronger long-term relationships, as Honeywell is both an Amazon Business customer and a selling partner on Amazon Business. One example is “Buy Honeywell,” a program that drives its employees to Honeywell’s own products – like hard hats, gloves, and masks – using Amazon’s Guided Buying feature, which Honeywell plans to open to outside customers.   “We try to use our own products whenever it makes sense,” Canales says. “Amazon Business allows us to flag preferred items and brands, including our own.”
 

“Procurement and sales are moving away from the transactional piece that was an inherent part of it for years and toward something more automated,” Canales continued. “We’re going to have more valuable conversations on partnerships, on ideas, on projects, on initiatives. It’s much more now than ‘Send me the product’ and ‘Is it coming on time?’”

Committing to the Long Term 

Like growth, resilience is not something that happens overnight. Organizations should expect years of investment and planning before true success is achieved. Further, they will need to identify partners willing to grow with them in the long-term, adapting and changing as their customers — and employee's — needs adapt and change.

In their 2022 report, Shockproof You Supply Chain for the New Age of Disruption, Gartner predicts that "by 2030, 80% of companies will have digital and physical business synthesized and executed in supply ecosystems that are competing in a multi-polarized, constantly disrupted world in which resilience and risk management will be the key competitive advantages and differentiators for success."

Resilience, then, is only rising in importance, and any organization that wants to grow and thrive in tomorrow's world must prioritize this dynamic skill.