Relationship Intelligence: Key to Weathering Disruption

Photo by Martin Sanchez on Unsplash

We are all familiar with why this year has been a stressful time for supply chains. Faced with new challenges, companies in every sector are re-thinking their supply chains with resilience in mind. In doing so, procurement departments must be aware of how supplier choice impacts resilience, and how the application of relationship intelligence tools can improve disruption responses.

Disruptions in the supply chain are commonly described as containing five distinct periods. The names tend to vary slightly, but for our purposes they are Preparedness, Disruption, Stabilization, Recovery, and Aftermath. During each of these periods, the company experiencing the disruption has unique priorities and must correctly utilize their resources and information to ensure proper navigation of the situation.

Key to getting the most out of these assets are relationship intelligence tools. Programs that can draw from multiple sources to develop deeper insights into supply networks are invaluable in reacting to disruptive events. In fact, they have an important role to play during every one of the five stages of a disruption.

Stage 1: Preparedness

The most obvious solution to any problem is to be prepared for it. This can be tricky in the case of supply chains, as disruptions can come from any direction through any number of involved partners, or in the case of 2020, every direction at once. It is crucial to identify and weed out weaknesses in times of stability when it is easiest to make adjustments. Suppliers may have the same second or third tier partners, they may be located together in areas susceptible to disrupting weather events, or they may utilize long transportation routes subject to interruptions both natural and political.

Whatever the case may be, a proper understanding of what these vulnerabilities are and how they relate to you is vital. Using proper relationship intelligence tools such weaknesses are much easier to pinpoint and address, and in some cases a potential risk may be worked out of the supply chain entirely. Even when that’s not possible, choosing communicative suppliers, both in terms of ease of contact and information sharing, increases visibility of incoming threats once they inevitably appear.

Stage 2: Disruption

Once a disaster strikes, the benefits of a well-prepared supplier network are realized. It is not always possible to avoid disruption altogether, but diversity among suppliers often lessens the blow from any particular event. Closely located suppliers can still deliver product in the event of catastrophes affecting international partners, suppliers that maintain more conservative utilization rates or safety stocks can adjust to fill gaps, and suppliers that have similarly intelligent sourcing as your procurement team may avoid significant impact on their operations entirely.

A key objective within the initial disruption is information gathering, which can either be helped or hindered by your supplier choice. Ideally, having chosen transparent suppliers with good relationship intelligence, it will be easy to identify where and how severely you are affected. It can take time for the effects of a disruption to transmit through a supply chain, so good upstream communication is essential. With suppliers that were selected in part for their leadership and communication, the move to the next step will be faster and more effective.

Stage 3: Stabilization

Once information is collected about what exactly the disruption is, it is time to react. Stabilization can take many forms, but the goal is to arrest the negative impacts of the disruption. This process can involve measures taken with active suppliers as well as connecting with new ones outside of the normal supplier network. Intelligent choice of these new suppliers is important, as they will be of no help if they are affected by the same issues that disrupted the supply chain in the first place.

Note that the objective of this stage is not immediate improvement in operations. The goal is to reach a state of operational stability, albeit lower than the original level before the disruption. This allows for more time to gather information and set plans for the next stage, which may not be as ad-hoc as the measures needed to halt the negative movement in operational ability.

Stage 4: Recovery

Recovery is a much longer stage than either of the previous two. Using the information collected during the initial disruption and stabilization stages, more permanent solutions now need to be created to return the supply chain to the level of operation that existed prior to the disruption. Perhaps suppliers need to be replaced, key suppliers switched out with existing alternates, contracts re-negotiated, or any number of actions that have longer lasting implications.

These actions carry the same relationship intelligence needs as seen in the time before the disruption, but with a greater emphasis on the recent activity within the suppliers. Both existing and new suppliers need to be evaluated on their responses to the disruption, necessitating supplier intelligence tools that are responsive and customizable to unique circumstances or requirements. Additionally, new suppliers must be held to the same rigorous selection criteria as before, in order to avoid having the solutions to current problems cause their own issues in the future.

Stage 5: Aftermath

Depending on the scale of the disruption, the recovery will last weeks, months, or years, but ultimately the supply chain will reach another stable state of operation. It is entirely possible that the level of this new state will be lower than what it was prior to the disruption, but the goal is to use the stress to the supply chain to resolve unforeseen vulnerabilities and bring operations to a greater degree of performance than existed previously.

Ideally, the supply chain will have a greater resistance to disruptions as well. Each new issue adds to the understanding of the supply chain’s strengths and weaknesses, although this understanding is only gained and utilized through the use of proper intelligence tools. This final stage cycles back into Preparedness, as supply chain planners use the lessons learned to anticipate the next disruption.

Information permeates supply chain planning, and in supplier choice it is no less vital. Access to it, and proper utilization of it, can make or break a company’s success during a crisis. Relationship intelligence tools are increasingly recognized as invaluable during these situations and a key competitive advantage, the only question is whether you will have one ready in time.

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