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Building Resilient Supply Chains In A World Of Unknowns

Updated: Jan 23

Jochen Schwenk is CEO of Crisis Control Solutions LLC & Schwenk AG, an expert in risk and crisis management for the automotive industry.


In our current volatile and unpredictable global landscape, supply chain strength has never been more vital. Supply chain management has always been the operational backbone of the global economy, but it is also now at the forefront of strategic business discussions as companies face increasingly complex and unprecedented risks.


The Johari window framework, made famous in part by Donald Rumsfeld’s 2002 quote about the ”known unknowns” and “unknown unknowns”—the things we don’t know we don’t know—is an effective model because it acknowledges both blind spots and unspecified risks.


Creating resilient supply chains goes beyond managing known risks—it’s also about preparing for the unknowns, including the “unknown unknowns,” that can disrupt operations without warning.


But how can we prepare for risks we cannot anticipate?


As the CEO of a company that offers crisis and risk management services to global manufacturers, I recommend that all business leaders take a proactive approach to creating

more resilient supply chains and managing the unknowns in their companies.


Understanding The Complexity Of Modern Supply Chains


As businesses continue to source products and raw materials from suppliers around the world, they become more and more interconnected. This also makes them more vulnerable to unknown factors.


There are some unfortunate “known unknowns” that can occur, such as trade wars, political instability and geopolitical conflicts. But there are also “unknown unknowns,” such as terrorist attacks or natural disasters. For example, this summer in my native Switzerland, extreme flooding affected the production of a special aluminum alloy that several major auto manufacturers in Europe depend on. Without this alloy, production of new cars ground to a halt, creating a serious crisis and highlighting the dangers of having only one supplier for a key component.

Leaders must take a wide range of factors into consideration when creating and updating supply chain risk management strategies.


Identifying And Managing Known Unknowns


There are four essential risk mitigation strategies—risk avoidance, risk reduction, risk transference and risk acceptance— that apply to many different types of situations. The catch is that these strategies are only relevant for known risks. While you can’t always predict known unknowns, you can use these concepts to develop plans to identify and alleviate potential risks with some strategic foresight.


• Scenario planning: This is a powerful tool for anticipating potential disruptions. By envisioning scenarios such as pandemics or economic downturns, you can develop effective contingency plans. Or if you live in an area where earthquakes or hurricanes are common, you could plan in advance to cope with the consequences of the next big natural disaster.


• Supplier risk management: A common business mistake is over-reliance on a single supplier or region, which can be catastrophic if the supplier encounters an issue. Diversifying suppliers and transportation routes whenever possible offers a buffer against those risks.


Preparing For Unknown Unknowns


Risks that are unforeseen are inherently difficult to plan for. But you don't need to know the exact root causes of a disruption to prepare a response. A supplier's production facility could be damaged from a fire, a flood or an airplane crash. Whatever the reason, the outcome would be the same: an inability to procure the products you need to do business. Your goal should be to design your supply chain to be flexible and resilient so you can make quick decisions and adapt in response to any crisis.


• Resilience through redundancy: Creating redundancies in your supply chain, including establishing backup suppliers, stocking additional inventory and mapping out additional routes, can greatly lessen the impact of a devastating unexpected disruption.


• Leveraging technology: Certain emerging technologies such as AI and the Internet of Things offer new ways to gain better visibility into your supply chain, making it easier to identify and mitigate potential disruptions.


Effective Strategies For Building Resilient Supply Chains


Building resilient supply chains requires a dynamic and multifaceted approach. These strategies can help your business strengthen its operations against both the known unknowns and the unknown unknowns.


1. Collect And Deploy Intelligence


We now have unprecedented access to information. Use it to your advantage. In my company, we use open-source intelligence (OSINT) strategically for risk management. For instance, if you want to vet the trustworthiness of a potential supplier, you can do a thorough background check on the company and its leadership and management teams using publicly available information. Look for legal, financial or human resources issues that might be red flags.

Once you have valuable intelligence, leverage it to strengthen your supply chain. If you learn that you have a dependency on a single supplier in an area at risk of political turmoil or natural disasters, for example, find a reliable secondary source. Collect intelligence and re-evaluate your risk analysis every two to three years.


2. Stay Up-To-Date On Technology


Technological advancements can significantly improve the speed and accuracy of gathering and analyzing information. Test AI and machine tools to process large datasets and identify patterns and potential risks. Use social media monitoring tools to acquire real-time insights into situations on the ground, especially in volatile regions.


3. Foster A Culture Of Resilience


Develop a comprehensive risk management framework that includes scenario planning, supplier diversification and contingency planning. But recognize that to create a truly resilient supply chain, you must make more holistic changes in your organization. You need to build a true culture of resilience from the top down.


Be a role model for your team members. Regularly discuss risk scenarios with your team, and encourage them to keep their eyes and ears open for potential issues. If you visit a supplier, use proven tools, such as a rapid plant assessment, to quickly gauge the health of their operations. In just an hour or two, you are likely to learn more about risks than you would in a formal audit.

It's impossible to anticipate or eliminate all risks from your supply chain. But by focusing on increasing your resilience and adaptability, you can prepare your business to handle any future challenge.


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