Supply chain strategies in the VUCA world

Abstract

Companies use supply chain strategies to achieve competitive advantage in the market. Volatility, uncertainty, complexity and ambiguity (VUCA) have been characteristics for the global supply chain in the past years. The COVID-19 pandemic led to factory and port closures, transport bottlenecks and lorry driver shortages, which have had an impact on the supply chain. The world has become less predictable, which requires companies to define supply chain strategies to cope with more risks and uncertainties. An updated supply chain strategy system integrating offerings, capabilities, vision and mission is described. A method to define the four types of capabilities — products, processes, equipment, digital tools — is explained. The approach to translate the strategy intent into action is based on the steps architecture, design, implementation and execution. This can be defined for the key capabilities that need to be aligned for the success of the business. An example explains the application of the approach in a company. Reviewing strategy can be now executed more regularly and standardised, accelerating the time to adapt the strategy to changed requirements. Defining and implementing the supply chain strategy are key tasks for many companies. A good supply chain strategy helps a company to improve the competitiveness in the markets. Understanding customer requirements and own capabilities, the supply chain strategy defines how the company will excel in the market and for the customer. As the supply chain is responsible for most customer-oriented processes, it typically translates the company strategy in an actionable format. Many companies struggle to define the supply chain strategy and evaluate it regularly to identify when this strategy needs to be updated. VUCA have characterised the supply chain world in the last years. In the last 18 months many additional supply chain disruptions have appeared and long-standing supply chain assumption have proved to be wrong. Many companies need to review and update their supply chain strategy to align their existing capabilities with the changed market requirements, acquire new capabilities and refocus their internal and external processes. This paper discusses how supply chain leaders can define a new strategy to cope with the changed situation.