Resilient Operations
Transform and modernise operations
Global events of the past year have tested the resilience of the world’s supply chains highlighting the need for timely information, accurate interpretation and swift action to enable resilient operations to thrive in the face of change.
Supply chains are the backbone of operations thinking and have evolved into complex, highly-tuned globalised systems. But recent events have exposed their vulnerability to unplanned change.
Read our top Resilient Operations insights
Reinforcing operational resilience
Three steps for the journey
Essential themes the pandemic has emphasised
Data is king
It’s a concept we’re all only too familiar with. The question we have to ask ourselves is how far our own organisation has travelled on its transformation journey to embrace it? Fundamentally, supply chains are already going digital with faster interactions and automated decision-making for more and more routine activities (especially regulatory and administrative). There is a host of new innovations already in development that will soon enable them to extend their visibility along the digitised supply network with a massive expansion of ‘right time’ information. Soon every technologically equipped organisation on our supply chain will be able to sense and respond to issues and disruption like never before.
There will be no need to hold inventory buffers to cushion against adversity, options will be predicted for them in real time with pre-calculated outcomes for each scenario, based on detailed data analyses. Executive’s time will now be focused solely on the critical high-level decisions that need their expertise and which will define their operation’s competitive advantage.
Knowledge is power
How powerful would it be if we could know exactly what was happening at every moment, in every link, on ever supply chain, from the purchasing of raw materials to the end customer taking ownership? Today it would certainly be pretty powerful, but soon it will merely be the norm. Knowledge is the result of understanding and interpreting the data that will continue to amass around us in the years to come.
The key is not quantity but the quality of the data and the extent to which we can interpret it so that it yields meaningful answers to pertinent questions. Global supply systems and their related infrastructures and wider ecosystems are becoming increasingly convoluted, even chaotic, so knowing where to look and how to codify what we find is going to be ever more challenging.
Knowledge will not only keep our operations efficient and help maintain our commercial performance but, more importantly, it will be key to sustaining our resilience, giving us the know-how to make the right moves at the right time. Precisely.
People are key
As we build ever more sophisticated organisational capabilities, the speed of decision-making increases then, as we as automate more routine tasks, the human interface snaps into sharper focus. How can we enable our employees to deliver the best value? How should we restructure the future of work in our operation? How do we refresh and retrain people to align with the radical changes taking place in our operations function?
How do we attract and retain the best talent in an increasingly automated discipline? Rethinking and repurposing the human resources in operations is going to be a tremendous challenge for the 21st century. Especially as human minds are and always will be absolutely key for the resilient organisation, especially in the increasingly automated field of operations.
While it’s true that machines and robotics are not only quicker at routine tasks than humans they are intrinsically more resilient (not being susceptible to health pandemics, they can carry-on working round the clock with no need for social distancing). But their greatest strength is also their perennial weakness: they are inherently weak at coping with the unexpected and cannot act on instinct.
Anything for which they have not been prepared, or taught how to make a balanced assessment, puts their processing skills behind that of a human mind. Given that responding to the unexpected is at the core of resilience, it follows that human minds will always play a key role in maintaining it and the people in the operation will need to be trained, prepared, empowered and motivated to think and act instinctively when unexpected events strike.
Speed is vital
The agility with which an operation can spot and interpret an issue, then flex and react in response is essential to its resilience. The three dimensions of operational speed are the following:
1) Speed of supply chains:
Given that most supply chains are designed for cost and efficiency they can have some long lead times which are incapable of responding quickly to change. These may still be the right solution in faster-moving future business environments, but it does mean that resilient organisations need to understand the continuity risks and factor-in some flexibility where possible.
2) Speed of decision making:
If we think about processes that have been designed over the last few decades, it’s not uncommon for demand planning solutions to refresh their demand history data monthly. During the pandemic most operations reduced this to weekly, or even several times per week. This means more and more frequent assessments of what customers are demanding, agreeing what can be made, deciding how to prioritise and synchronise the operation, assessing the implications for the business plan, revenues and cashflow, etc. It is clear that critical decisions have had to be made ever faster, without compromising their accuracy or authority. The solution is, of course, digital, especially with the advent of AI-driven routine decision-making which will enable senior decision makers to focus their effort on the exceptions that need human intervention. Digital transformation programmes must, themselves, be faster than ever now too, because the pace of change could make them obsolete before they’re finished.
3) Speed of adaptation:
The third speed dimension relates to the speed with which the organisation can retrain or reorientate staff to work with new technologies, recruiting and onboarding new talent where needed.
Relatively few organisations are able to advance their clock-speed or develop more agility in their supply chains without outside help. Deloitte’s multiple capabilities mean that, while we work with you identify the areas on which to focus, we can also be taking the strain with your digital transformation. Our goal is to prepare you to predict and be ready for events before they happen rather than after they have hit you.
Challenges to building operational resilience
Internal inertia
Resilience depends on the speed and responsiveness of digitised supply chains. But, as we know, the digitisation of supply chains usually requires a wholescale move to the cloud, which represents a massive transformation for most organisations. This is frequently resisted and delayed because of its cost and disruption. But until it is implemented there will be an accumulation of costs and complexity associated with continuing to work without it. This ‘tech debt’ typically increases over time and, unlike transformation costs, is not an investment but a drain on resources. Resisting transformation turns out to be not only more costly in the long-term, but wasteful in the short-term.
"Resisting transformation turns out to be not only more costly in the long-term, but wasteful in the short-term"
Lack of data
Recent events have also shown that too many executives simply didn’t have adequate line of sight on what their suppliers were producing and had little knowledge of any unforeseen, and potentially critical, problems further upstream (maybe several links further up the supply chain). They had no idea how vulnerable they were until they had to face the consequences.
In response to this we have started to see a strategic shift towards gathering deeper information that can provide decision makers with greater visibility and more timely signals to act. These will enable resilient organisations of the future to sense and respond more quickly to events happening several links upstream before any damaging knock-on effects have had a chance to make an impact.
Resilience
The pandemic exposed the lack of resilience of some operations which were heavier on their feet than many had expected. Some were only set-up to respond to events on the customer-facing demand side and ignored those in their own supply chain, which would falter and sometimes dry-up altogether. We have learned that transforming operations to become more agile, adaptable and responsive to unexpected change, from wherever it came, was not only the best way to survive a short-term crisis, but likely to be critical for long-term success in a less predictable business landscape. To be truly resilient in the future, operations must create more responsive, forward-looking supply chains that can anticipate and prepare in advance for future change.
Overcoming the challenges of building a resilient operation demands a breadth of experience and expertise beyond the scope of even the most accomplished organisation. Deloitte’s multidisciplinary capabilities and end-to-end thinking, combined with some of the world’s most sophisticated digital expertise, make us a natural thought partner. We can then share the load by working alongside you to implement the changes you need to make.
Security of supply
Resilience means being alert to potentially insecurities in the supply chain. Many operations have been surprised to find suppliers maybe three or four links down their supply chain that have been reliant on supplies from potentially vulnerable parts of the world. For example, given the prevalence of smart technologies across so many product sectors, access to semiconductors is of critical importance. Yet most are manufactured by a few massive suppliers in politically and logistically sensitive locations and represent a bigger risk to more operations than most might have imagined.
In the other direction, our chain might include our supplying to geographies that have unpredictable and insecure demand. Yet, these could be the primary focus for our organisation’s future growth and building-in resilience could be a challenge strategically, financially and relationally. But it is too important to ignore and now, while recent events are still fresh in everyone’s consciousness, is the time to act.
Political intervention
Resilience means knowing how to react when public policy takes a different course from the one expected. While much of what happened during the pandemic was an acceleration of what we were expecting anyway just sooner than we had imagined. The event that seemed to take everyone by surprise was the way in which national governments intervened to shut down national borders, curtailing global trade at a stroke.
Vaccines were prevented from leaving their country of manufacture even by countries who had not yet approved their use with many countries banning the export of PPE equipment outside their own borders. This sends out a critical resilience signal to any operation with globalised supply chains. The pandemic gave us an insight into how national government might potentially react when national security was under threat. The future source of the threat could just as easily be political, military or environmental. What would happen to our operations if a future event curtailed the supply of our digital world’s voracious appetite for semiconductors or batteries?
ESG considerations
Resilience means anticipating evolving trends that could change how and what we offer. These might include growing sensitivities around products that are damaging to the environment, these are more than just the obvious things like using non-recyclable/recycled/bio-degradable plastics in products and packaging, but could include selling non-repairable/disposable products or products that contain components from countries that destroy rainforests, burn fossil fuels or disrespect human rights, etc. Customer demand can come to a shuddering halt if we get it wrong a few tweets from an angry observer could turn out to be a wake-up call we hadn’t seen coming.
Deloitte’s global reach gives us a big picture perspective which, combined with our wide network of expert partners, enables us to provide accurate answers to complex challenges. We can also offer the change implementation capabilities you will need to develop the resilience your operation will need for ever changing future.
