Insights

Mastering uncertainty: Building resilient supply chains in a geopolitical world

Anand Kalathil, Director, Supply Chain Management

There has been a major overhaul of global supply chains in recent years. Geopolitical events, like the US-China trade war, the Russia-Ukraine conflict, and the pandemic, have raised risks for companies with global supply networks and exposed the vulnerabilities of lean, efficient models. These disruptions highlight the need for supply chain resilience.

While predicting future events is daunting, even when they seem inevitable in hindsight, scenario planning offers a powerful tool. It aids in preparing for the future by envisioning multiple scenarios. These scenarios serve as a roadmap, identifying the risks and corresponding disruptions caused by potential events. While some scenarios may not materialize, the process strengthens your organization's ability to adapt (a vital aspect of a Triple-A Supply Chain). Scenario planning helps you respond faster by preparing for various possibilities, making your supply chain more agile. It significantly reduces the time it would take to respond to a situation by preparing in advance for various events, thereby enhancing the organization's agility and adaptability.

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Integrating scenario planning into organizational risk management

A case of scenario planning for supply chains would include identifying the risks to its supply networks from global events. By mapping the current network, the retailer can pinpoint hotspots susceptible to shipment delays in case of new events. For example, i ncreased tensions in the Middle East could significantly disrupt their supply chain. Once key risks have been identified and their probability or likelihood of occurrence determined, supply chain teams need to collaborate with other internal teams and partners, like suppliers and dealers, to plan for mitigating measures.

Scenario planning is an ongoing process, not a one-time exercise. Real-time supply chain visibility is fundamental for effective risk management. A robust control tower with integrated scenario planning and risk management capabilities empowers businesses to proactively address challenges and build Triple-A Supply Chains (agile, adaptable, aligned).

Here's how a global retailer can leverage scenario planning and real-time visibility:

1. Identify risks with data-driven insights: Leverage real-time data to map your supply network and pinpoint potential disruptions. This could involve analyzing historical shipment data to identify potential bottlenecks or using open-source intelligence (OSINT) to track developing geopolitical events.
2. Collaborate and mitigate: Once key risks are identified, collaborate with internal teams (operations) and external partners (suppliers, dealers) to develop mitigation strategies. This might involve diversifying suppliers, identifying alternative shipping routes, or implementing predictive analytics to anticipate potential delays.

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Data is key for scenario planning

Data-driven scenario planning is revolutionizing how businesses prepare for the unexpected. Geopolitical conflicts, a major source of supply chain disruptions, are often complex and multifaceted. Open-source intelligence (OSINT) provides valuable insights for geopolitical risk management. This includes news reports, social media discussions, blogs, and even forum conversations—all publicly available data waiting to be harnessed. However, ensure information is legally accessible.

While OSINT offers a wealth of information, internal data from your supply network can also be crucial. For example, suppliers may flag potential delays, shortages, or cost increases. These seemingly isolated signals, often overlooked, can indicate deeper issues like rerouting shipments due to disruptions elsewhere.

Here's where AI and Machine Learning (AI/ML) come in. Traditionally, scenario planning relied on brainstorming sessions, which can be time-consuming and limited in scope. AI/ML transforms this process by:

• Modeling scenarios faster and with greater detail: AI/ML can analyze vast amounts of data from OSINT, supplier insights, and historical trends to create a multitude of highly detailed scenarios in real time. This provides a much richer picture of potential disruptions than human brainstorming alone.
• Identifying high-probability events: By analyzing historical data, AI/ML can assign probabilities to different scenarios, allowing you to focus on the most likely threats. This helps prioritize your risk management efforts and resource allocation.
• Uncovering hidden patterns: AI's ability to sift through massive datasets can reveal hidden patterns and potential risks humans might miss. These insights can be critical for building a more resilient supply chain.

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The critical role of human expertise

While AI/ML is a powerful tool, human expertise remains essential. Supply chain professionals must critically analyze the output from AI predictions before implementing them. The final decisions require a nuanced understanding of the business, market dynamics, and risk tolerance.

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Real-time visibility: The cornerstone of resilient supply chains

Supply chain visibility is no longer a luxury; it's the foundation for effective risk management. A robust control tower, integrated with scenario planning and risk management capabilities, empowers businesses to navigate the complexities of today's global landscape. As Prof. Hua L. Lee of Stanford Graduate School of Business highlights in his concept of the Triple-A Supply Chain (Agility, Adaptability, Alignment), visibility is critical to building these essential characteristics.

Fueled by real-time data from an integrated platform, scenario planning strengthens all aspects of a Triple-A Supply Chain. Here's how:

• Agility: Businesses can react swiftly to short-term disruptions and adjust their supply chains to meet long-term structural changes, minimizing operational disruptions.
• Adaptability: Real-time data allows for continuous improvement and adaptation to evolving market conditions and geopolitical risks.
• Alignment: Visibility fosters collaboration between management, operations, and external partners, ensuring everyone is working towards the same goals.

Our research in association with Supply Chain Digital reveals that 97% of companies consider real-time visibility crucial. This underscores the importance of solutions like UST Omni™.

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Geopolitical risk management

Geopolitical events can erupt like sudden storms, disrupting even the most meticulously planned supply chains. While predicting these events is a near-impossible feat, scenario planning empowers you to envision various possibilities and develop contingency plans. This proactive approach bolsters your strategic and commercial resilience.

Here's why scenario planning is crucial:

• Reduces bias and enhances foresight: Scenario planning encourages you to challenge existing assumptions and base your plans on realistic trends and actual situations. This reduces bias and leads to more effective forecasting.
• Multi-level and time-bound planning: Consider the potential impact of geopolitical events across different time horizons (short-term, long-term) and geographic scales (global, local). This comprehensive approach provides a clearer picture of potential disruptions.
• Building Triple-A Supply Chains: Scenario planning strengthens Triple-A Supply Chains. These resilient structures are better equipped to handle disruptions caused by geopolitical events.

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Create your playbook to manage geopolitical risks.

The ever-changing dynamics of today's global supply chains demand a robust playbook for geopolitical risk management. With a plan, organizations can proactively improve their resilience to avoid lurching from crisis to crisis.

UST Omni™ empowers you with real-time visibility and orchestration capabilities to navigate geopolitical risks. Combined with data-driven scenario planning and AI/ML insights, UST Omni allows you to:

• Identify potential risks early: Proactively identify potential disruptions using real-time data analysis.
• Develop effective mitigation strategies: Leverage AI/ML to recommend the most effective mitigation actions for each scenario.
• Maintain supply chain continuity: Ensure your supply chain continues functioning even during disruptions caused by geopolitical events.

By building a comprehensive playbook and leveraging solutions like UST Omni, organizations can weather the storms of geopolitical, build more agile and adaptable supply chains prepared to weather the storms of an ever-changing global landscape.

To learn more about how UST designs and engineers future ready enterprises, click here.

RESOURCES

https://www.ust.com/en/evolve

https://www.ust.com/en/boundless/articles/visibility-is-the-route-to-resilience-in-the-supply-chain

https://www.ust.com/en/ust-explainers/what-is-supply-chain-management