Why Are We Continually Surprised by Disruptions?

By Stan Aronow | April 02, 2021 | 0 Comments

Supply ChainBeyond Supply Chain

The other day, I was listening to the R.E.M. classic, “It’s The End of the World As We Know It.” Michael Stipe’s rapid-fire lyrics still baffle and amuse me and a thought popped in my head that supply chain could have its own version that includes the Suez Canal and Texas freezes, among all our other recent doozies.

We’ve never been strangers to disruption in supply chain, but lately we keep getting hit with ones we just didn’t expect. In some cases, cascading disruptions like the winter storm in Texas caused utilities to fail, knocking out critical upstream capacity in petrochemicals and semiconductors. This failure, in turn, is still wreaking havoc on a much wider swath of downstream industries reliant on ready supply of those critical ingredients. In others, it’s the proverbial 100-year event that now seems to arrive every few years. #2020

What Might Come Next?

Later this spring, the Gartner Supply Chain Research team will publish the results of a study showing some supply chains as more successful at minimizing exposure to all manner of disruptions. These organizations think differently about designing in mitigating characteristics and capabilities compared to most traditional supply chains. Perhaps this is the best we can do — shore up the castle walls and hope they weather whatever storm comes next.

On the other hand, we are planners in supply chain. There’s got to be a way to bring some of these unexpected risks onto our registers, right? Maybe we just need to channel our inner Debbie Downer and open our minds to the possibilities. In this spirit, here are a few disruptors lurking right at the edge of our day-to-day.

A Massive Cyber Attack

(Ironically, I am updating the operating system on my work phone as I write this, based on a recent exploit discovered on Apple devices.)

The secret, unwanted code may already be sitting on your company’s servers, lying in wait for the trigger date or event. Imagine an attack that shuts down not only your own systems (email, ERP, partner portals, etc.) but at the same time those of some of your customers, suppliers and strategic partners. Cyberattacks are the modern-day version of a cold war strike. As tensions between East and West escalate, the probability of an attack making it past the firewall will only increase. In some cases, perpetrators’ motives may be purely financial or anarchistic in nature, but the net result is the same. In total, the financial impact of cybercrime is expected to reach $10.5 trillion by 2025. To put this in perspective, a country of that size would run the third largest economy in the world.

Cyber disruption is no longer a “black swan” risk, it’s more like a seagull, loaded and ready to strike.

A Silver Exodus

The U.S. Bureau of Labor Statistics recently noted that more adults age 65 and older left the labor market in 2020 than in any year since it started tracking in 1948. Health and safety concerns were certainly a factor, though it’s expected that many won’t return post-pandemic. Moreover, for those still in the workforce, there is a gathering force that may lead to another wave of exits.

In 2020, governments in most major economies piled on enormous fiscal stimulus and their central banks concurrently created the most accommodative monetary environment since the 2008 financial crisis. A lot of this money has found its way into investment markets, boosting global stock indexes to all-time highs.

Why include this “good news” story in a list of disruptive threats? There is a wave of Baby Boomers on the cusp of retirement. Strong returns in near-term equity markets could accelerate the exit of a large cohort of today’s workforce that contains the wisdom, culture and steady hands currently guiding our supply chains. Unless we take a proactive approach to institutionalize and pass on this expertise, through mentoring and the use of knowledge management systems, we may find ourselves suddenly underpowered in the face of today’s more disruptive environment.

Taiwan Disrupted

Frequent earthquakes, stifling droughts and “sovereignty risk.” If the high-tech industry were designing its supply network, greenfield, it would probably choose NOT to place the largest global share of semiconductor production on the powder keg that is Taiwan. TSMC, the world’s dominant chip foundry manufacturer, recently announced that it would open a large wafer fabrication plant in Arizona. Intel recently announced that it, too, would invest billions of dollars in semiconductor manufacturing capacity in the U.S. and Europe. These moves point to industry recognition of the risk concentration. Multibillion-dollar semiconductor plants take years to build, however. In the meantime, the world will be holding its breath hoping its Taiwan bet doesn’t come up snake eyes.

With the right subject matter experts, any supply chain organization can take another, more refined look at the risk horizon. Just as important will be a mindset recognizing that the number of risks within the realm of higher probability has increased, including those cascading from upstream sources. Sounds daunting? If this job were easy, anyone could do it.

Stan Aronow
VP Distinguished Advisor
Gartner Supply Chain
Stan.Aronow@gartner.com

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