The measure of intelligence
Global supply networks are complex systems - so their behaviour is unpredictable when operating conditions change. That's just how it is. We didn't set out to make them complex, but improvements in communications and transport created the right conditions for complexity to emerge over time. We started simple and then evolution happened.
COVID-19 has surely changed the operating conditions. Businesses the world over are trying to work out what happened, how they should react now and what they should do differently in future. There will be calls to remove the complexity, to go back to simple - but evolution is powerful force and we shouldn't seek to 'reverse it', or hope that it doesn't happen. Systems that can't adapt become fossils.
It's worth noting that the chaos brought by COVID-19 will seem insignificant when compared to those imposed by climate change. If we want to #buildbackbetter, we need to be able to set, and agree, new goals for our systems - including total carbon emissions, impact on biodiversity, contribution to equality and human welfare etc. The mechanisms for that remain subject to debate, but there is increasing urgency to find solutions. In the meantime, there are three major parameters to consider in guiding the future evolution of global supply networks;
- connectedness: this is the 'local vs. global', 'many suppliers vs. few suppliers' debate. Although it will be tempting to adopt a new mantra of localisation or rationalisation, the future is likely to be a mixed picture for most. A singular focus on creating entirely localised networks will soon run in to problems. Buying a controlling interest in critical suppliers can be very effective in aligning interests, but doesn't scale well. Critically this about network design, not chains (please, not chains...)
- change control: evolution is change, and is fundamental to the success of a system, the question here is how to 'sense' it. How do you know when a supplier's supplier started buying inputs from a new supplier? This is the traceability and mapping discussion. What's important here is understanding what level of detail you need, when you need it, and how reliable it must be. Is it OK to learn about an upstream change in your network 3 months after the event - when the finished good arrives in your inventory, or not? Did that change definitely happen or is it a statistical likelihood? Do you need to know about everything, everywhere, all of the time, or just the most important? Who decides what's important? This level of insight was never built-in to global supply networks v1.0. Designing solutions requires detailed planning, implemeting them takes time and commitment. Arguably, this investment was worth it yesterday, but it will be much more valuable tomorrow.
- stocks and flows: this is the 'just-in-time' vs 'always available / resilient' question. When operating conditions are stable, minimising inventory is great for maximising profit, but ...well, you get the point. If we change our assumptions around operating stability, then efficiency may no longer the most important attribute.
COVID-19 is just the most recent pandemic. There will be others. Climate change is already baked-in to our global 'operating model', the only questions are how much and how soon. Updating our assumptions about stability seems prudent. After all, it's difficult to make predictions, especially about the future.