Five keys to creating an effective supply chain playbook
In today's fast-paced and interconnected global marketplace, supply chain disruptions have become commonplace and have had severe consequences for businesses. Unexpected events – whether due to natural disasters, geopolitical uncertainties, or simply customer demand fluctuations - can disrupt the smooth flow of goods and services across supply chains. Result: Financial losses, customer dissatisfaction, and reputational damage – or even worse, business failure.1
Forward-looking company executives understand this and try to anticipate, to the greatest extent possible, these events and build in contingencies to effectively manage and mitigate the impact of these disruptions. This is where a supply chain disruption playbook comes in.
The playbook is a strategic document that not only looks at risks from a company and suppliers’ perspectives, but also across the end-to-end supply chain. It outlines a proactive and structured approach to managing supply chain risk and provides a set of guidelines, protocols, and contingency plans that businesses can follow.
In this report, we will explore the key components of a supply chain disruption playbook and provide insights on implementing and managing it effectively. By following the recommendations we outline, your company can develop a robust playbook that prepares you to navigate disruptions, mitigate risks, maintain operational continuity, and confidently face the challenges of the modern supply chain.
Blueprint for assembling a supply chain disruption playbook
Explore actions that can be taken both before, during and after a disruption has occurred.
- 1. Risk assessment
- 2. Scenario planning and training
- 3. Communication and collaboration procedures
- 4. Data and analytics visibility
- 5. Stakeholder engagement and relationship management
The first step in creating a supply chain disruption playbook is to conduct a comprehensive risk assessment. This involves identifying potential disruptions specific to your business's industry, geography, and operations.
The next step is assessing the likelihood and potential impact of each potential disruption, and prioritize them based on severity. Next, develop tailored response strategies and contingency plans for each risk. Consider actions to be taken, resources required, and redundancies that may need to be activated, such as alternative suppliers or logistics routes.
Potential benefits of a supply chain disruption playbook
Minimizes financial losses:
By identifying and containing disruptions quickly and efficiently, businesses can minimize costs associated with delays, inventory shortages, or increased production expenses while strategically allocating resources and maintaining financial stability.
Keeps customers satisfied:
A well-developed playbook provides for effective communications with customers, managing their expectations and providing real-time updates on the status of their orders.
Enhances business resilience:
By preparing for potential disruptions in advance, companies can position themselves to recover quickly and minimize long-term impact. They can also identify vulnerabilities in the supply chain, create contingency plans, and develop strategies to mitigate risks.
Streamlines the decision-making processes:
The playbook should set out clearly defined procedures and protocols, including defined roles and responsibilities, guidelines for communication and collaboration, and steps for problem resolution. This streamlines decision-making and allows businesses to navigate disruptions more effectively, and reduces potential errors or delays in response.
60%
More than sixty percent of global organizations expect that geopolitical instability will have a detrimental impact on their supply chains in the next three years.
Source: KPMG, The future of supply chain (September 2023).
Supply chain disruption playbook is a dynamic, living document
A supply chain disruption playbook is vital to enable businesses to navigate sudden and unexpected challenges effectively. It ensures efficient response strategies are in place, minimizes financial losses, maintains customer satisfaction, and enhances business resilience. But it should not be treated as a static document; rather you should look at it as a dynamic and evolving resource that adapts to changing circumstances.
Supply chain disruptions provide valuable opportunities for continuous improvement and learning. You should regularly review and update the playbook – quarterly or every six months – to incorporate lessons learned from past disruptions and address emerging risks based on potential disruptions, market conditions, and emerging risks to ensure that the playbook remains relevant and effective. This may require updating response strategies, contingency plans, and communication protocols in order to align them with evolving business needs and industry best practices.
By continuously refining and learning from experiences, you can enhance the effectiveness of the playbook and strengthen your ability to manage future disruptions.
How KPMG Supply Chain Services can help
KPMG offers a technology-enabled planning transformation journey supported by a proven six-layer operating model that ensures accurate segmentation analysis and includes a demand plan and a data assessment. We offer an AI portfolio, a set of algorithms for supply chains, from augmenting your workforce and optimizing costs to making inventory management more efficient and assisting regulatory compliance. Let KPMG guide, accelerate, and de-risk your supply chain with purpose-built assets and accelerators designed exclusively for supply chain operations.
Footnotes:
- Source: S&P Global, Supply chain snags cited as bankruptcy filings pile up (March 25, 2024)
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