Risk and resilience

We’re hearing a lot of supply chain buzzwords as we emerge from COVID, such as transparency, visibility and resiliency. There is also talk of strategic shifts, like China plus 1, Just-In-Case inventory, re-shoring and supplier mapping. They all aim to address the same issue, which is how to reduce or mitigate supply chain risk so that the next disruption isn’t so disruptive. So, where are we headed?

That was the topic of a conversation I had recently with Bindiya Vakil, the CEO and co-founder of Resilinc. While Vakil’s day job is running a risk management solution company, she faced the difficulties of tracking the supply chain as a practitioner more than a decade ago. Then, she spent about four years leading a risk mitigation team at Cisco. The team quantified and prioritized risky components, and then implemented risk mitigation strategies.

“One of the first things I realized is that we had 40,000 component parts and I had no idea where they were made,” Vakil recalls. “When I looked in our ERP system. The address for Broadcom, one of our important suppliers, was Irvine, California, but I knew that all of their manufacturing was in Taiwan and South Korea, and their distribution was out of Singapore. I realized an earthquake in Irvine wasn’t going to create a problem for us.”

Vakil defined it as a data problem: If you have an early warning into what is going on – a pandemic in Wuhan, for instance – and can relate that warning to what might be affected in your network, you have time to react. If you don’t have the data, you’re out of luck. But, even with monitoring capabilities, if you haven’t mapped out your supply chain to understand where your suppliers are located, and where are their suppliers, it’s hard to act. “The faster we’re able to get all of that information, the faster we’re able to take stock and to act,” Vakil says. Mapping the supply chain is a little like knowing where all the bodies are buried.

During COVID, that was certainly the experience of AGCO, a company I featured in SCMR, as well as IBM, a Resilinc client.

Based on her experience at Cisco, Vakil co-founded Resilinc in 2010. Along with the dimensions listed above, she and her team brought something else to the table, an element Vakil describes as “LinkedIn for the supply chain.” “Collecting the data to map a supply chain with 40,000 components is cumbersome,” she says. “If I’m a company like Broadcom, I don’t want to map my supply chain for every customer. I want to do the mapping once, and then all of my customers can access it.”

With all of that as backdrop, how did Vakil, and Resilinc, experience COVID? “Normally, you experience different things at different times and only in certain regions,” she says. “In COVID, you experienced all of those things, all at the same time and across the globe in just six months.” She adds that “we’re still recovering. Right now, there’s a global ship shortage that’s causing pain.”

In retrospect, Resilinc picked up an early warning signal that something was amiss on December 28, when the Wuhan government warned hospitals to be on the lookout for an unusual pneumonia. Between January 4 and January 27, when Wuhan shut down, Resilinc issued three customer alerts. In addition, the system began to monitor new dimensions of supply chain risk, like infection and mortality rates and Pandemic Projection Measures, or PPM.

But that was just one piece of the puzzle. On January 4, Resilinc opened a virtual war room that geofenced Wuhan and identified suppliers in and on the outskirts of the city that were in the networks of its customers, and then identified alternative suppliers. “Our customers were able to pull inventory out of Wuhan before it shut down,” she says. That, of course, was predicated on having culture in place to analyze the data, believe the data and then act on it. Those that did, didn’t miss a shipment. The lesson: “People have biases, and there are certainly people who still don’t believe this is serious,” she says. “Supply chains can’t tolerate personal biases.”

Where is risk management going next? The next steps, Vakil says, is to move from the prescriptive analytics in place now – this just happened, here’s how many suppliers are affected and here are the parts that might come in late – to predictive, that is what you should do about it. That will be followed by the cognitive supply chain, or the ability for the system to take action, especially for single source, high revenue products. “We don’t want to wait for someone to believe it or not believe it,” she says.

As to some of those strategies, like Just-In-Case inventory and re-shoring, Vakil argues that they’re not economically feasible over the long run. “It costs billions and takes years to build new factories and warehouses and it can cost hundreds of millions to hold more inventory,” she says. “And, who’s to say that if you build those factories, you’ll have the skilled labor you need to run them.” Meanwhile, she adds, it costs a fraction of that to map and monitor your supply chain. “That’s the ROI, and if we don’t tell that story, supply chain is going in the wrong direction.”