Long-term disruptions mean how organisations and supply chains respond could become a key differentiator, according to Gartner.
Gartner said a key difference between ‘fit’ and‘fragile’ supply chains is how they react to disruptions such as the Covid-19 pandemic.
Fragile supply chains tend to “focus on short-term survival”, while the fittest supply chains view disruptions as “inflection points to improve the value that supply chain provides to the business”.
As a result, fit supply chains are able to move ahead of the competition after dealing with high-impact events, but fragile supply chains find themselves falling behind.
Simon Bailey, senior director analyst at Gartner, said: “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.
“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 organisation accordingly.”
The most impactful disruptions for fit supply chains are those that involve “fundamental structural shifts” in the context of how the supply chain operates, such as new technologies and changing competitive dynamics.
More fragile supply chains are most impacted by operationally-focused disruptions such as demand and supply shifts, Gartner said. By focusing on these challenges, they often lose sight of their long-term goals and overlook how structural shifts could help them maximise value.
Bailey explained: “It’s not the type of disruption that determines the supply chain impact. The type of supply chain determines the impact of the disruption.
“Fit supply chains excel at focusing on the structural disruption and proactively translating those into competitive advantage. They are able to change their organisational design to capitalise on structural shifts and create new value for their customers.”
How they approach long-term strategies and investments is another key difference between fit and fragile supply chains, Gartner found.
Most fit supply chains tended to maintain focus on the long term and preserve strategic investments during disruptive events, whereas fragile supply chains prioritised 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. Instead, cost optimisation 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,” Bailey added.
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