With the world becoming increasingly integrated, the global pandemic has shown the significant fragilities within our supply chains that have affected business both small and large. A business’ ability to absorb disruption and thrive is becoming more imperative with the business environment becoming increasingly more dynamic and unpredictable. Be that Covid-19, SARS, Ebola or general political unrest there is no reason to suspect the current disruption is a one off. Combating disruption is fast becoming the new norm and for those firms who wish to excel, building reliance to the unknown can bring significant benefits in downturns.
The focus for companies has traditionally been to maximise shareholder wealth be that by stock appreciation and/or sustained returns (e.g. dividends). Inevitably this means the firms fixate on growing sales and reducing costs, often brought about by firms seeking process efficiencies. Successful efficiency strategies commonly deal with known and predictable factors. If disrupted these process fall apart and often result in increased costs to fix. In the current environment where supply chains are prone to unpredictable scenarios, businesses must adapt and build resilience.
The Havard Business Review article, A Guide to Building a More Resilient Business, highlights six principles for consideration: redundancy, diversity, modularity, adaptability, prudence and embeddedness. Despite the increased costs implications in building business resilience, it can have significant economical benefits in the long term.
The current environment is like no other to test this. Overall, I am pleased to say that many of our clients have faired well during lockdown. A combination of implementing flexible supply chains/sale channels before March 2020 and adapting business models in this new world we live in. We would be very keen to understand how you have adapted your business during this period – please do give Polestar a call.
Resilience is especially important today because the business environment is becoming more dynamic and unpredictable.