The events of 2020 have highlighted how the interlinked, global nature of supply chains makes them vulnerable to a range of risks. Spurred by the COVID crisis, many companies are reconfiguring and refining their overall supply chain and risk management strategy taking a more holistic view of potential risk and resiliency.
In this article, we examine how companies can reconfigure their supply chain strategies to build greater resilience and agility to quickly adapt to disruption.
Looking into the future, business leaders are coordinating across their organizations to reevaluate the resiliency of their end-to-end global supply chains. This includes developing strategies that consider changes driven by technology and enacting new ways of working whether though the adoption of machine learning (ML), artificial intelligence (AI) or the future of work.
Since 2020, nearly all companies have experienced some level of business disruption and many have been transformed forever. The impacts vary significantly by sector. The manufacturing sector generally pivoted effectively to adapt to the crisis—quickly adopting digital technologies and using automation, and (depending on their location) rerouting where they source and manufacture their goods to bring production closer to consumer markets (nearshoring/onshoring).
Moreover, manufacturers with technological and digital capabilities (robotics, AI, machine learning, drones, advanced analytics, big data, digital twins, virtual/augmented reality) showed an advantage in their ability to more quickly adapt in response to disruption. Some companies also transitioned from dependency on physical retail stores to digital or hybrid selling models to deliver their products.
To stay competitive in this new business and economic environment requires new strategies and practices. Companies must reevaluate the resilience of their supply chains—from planning for potential disruptions within their current geographical footprints, to a full review and transformation of their end-to-end supply chain models. Synchronization of the end-to-end supply chain through technology is key to enabling better decision-making to reduce the risk of disruption.
It is crucial that tax leaders are involved in the early stages to better assess the tax impacts of supply chain transformations. Success requires, combining supply chain transformation with operational tax changes which means tax teams must have full visibility into the digital innovation and supply chain strategies and their impacts on operations, profitability, and asset values.
Resilient tax leaders should assess the direct and indirect tax consequences of proposed changes to their company’s supply chains. Through value chain alignment—the process of integrating global tax strategy with business operating models—the tax department can provide business leaders with timely and effective input on the tax implications of supply chain decisions.
According to Deloitte’s 2021 Global Resilience Report, 6 in 10 Chief Operating Officers believe disruption on the scale of 2020 will recur in the future on either an occasional or regular basis. That’s why it’s critical for businesses to build supply chain resilience and implement business strategies that accelerate performance and mitigate risk.
Doing so will provide more strategic value, enhance resilience and empower organizations to invest in the right capabilities from technology to operating models to outperform their competition and operate boldly.