Supply Chain Management in a VUCA World

Stephen DeAngelis

February 20, 2019

Anyone who has served in the armed forces knows the military loves its acronyms. For years the military has used the acronym VUCA to describe what, in wartime, is often referred to as the fog of war. VUCA stands for Volatility, Uncertainty, Complexity, and Ambiguity. It’s a term that started creeping into supply chain discussions several years ago. Back in 2011, supply chain analyst Trevor Miles (@milesahead) noted there is a similar sounding word supply chain managers should associate with VUCA. He explains, “I almost feel that we should be shouting ‘Vuka’ which in Xhosa (one of the South Africa languages) means ‘wake up.’ Wake up to the new reality that VUCA is a new norm.”[1] Subsequent global events have certainly proven him correct. Supply chain operations are complicated enough without the addition of VUCA conditions; but, that’s world in which supply chain managers live.

Supply chain management

Supply chain management might seem like a straight forward topic; but, Mike Mortson (@mmortson) notes there is no standard definition of supply chain management. “When I began my career,” he writes, “there was no such thing as ‘Supply Chain Management’. Supply Chain was not a title to be found anywhere on any organization chart. Yet all of the functions that we now associate with Supply Chain have been around for a very long time: Planning, Inventory Management, Logistics, Procurement and Purchasing, Warehousing and many more.”[2] He goes on to note, “The phrase ‘Supply Chain Management’ was originally coined by Keith Oliver in 1982 and subsequently gained increasing popularity as its usage was proliferated in books and language.” Coining a term and defining the term are two different things. To make that point, Mortson lists ten different definitions for the term from various sources. He concludes, “Nowadays I view ‘Supply Chain Management’ as involving most every aspect of any business. It is an umbrella term which encompasses the end-to-end aspects of Finance, Operations, Development, Sales, Manufacturing, Distribution, Customer Management, Supplier Management, Technology and I/T.” Rather than trying to define supply chain management, Eddie Davila, a Senior Lecturer and Undergraduate Program Director at Arizona State’s W. P. Carey School of Business, explains what it entails.

Dr. Muddassir Ahmed (@muddassirism), a supply chain thought leader, simply states, “Supply chain management is an important tool for managing product or services from its raw state to finished state and managing after sales services. It is principally concerned with the flow of products and information between supply chain partners (i.e., supply chain member organizations).”[3]

Supply chain management in a VUCA world

From the discussion above, it should be clear that supply chain management is all about optimizing the supply chain (i.e., keeping the supply chain running smoothly and efficiently). Disruption and volatility is anathema to supply chain managers; but, as noted above, that’s the world in which they must function. Rich Weissman, a former supply chain professional turned journalist, explains, “From Detroit to Brexit to China and beyond, vague economic threats and counter threats may be fodder for the breaking news junkies, but they run counter to normal business planning and operations. This economic and political agitation has created an aura of uncertainty and anxiety across the global economy, impacting well-entrenched and freshly-minted supply chains.”[4] Many of the policies and actions of the current U.S. administration have added to the volatility, uncertainty, complexity, and ambiguity being experienced by supply chain managers. Business consultant Kate Vitasek (@VestedWay) calls this the “Trump effect.”[5] She believes the Trump effect will speed up the trend that for years has seen the world move from globalization to regionalization. She reports that in an interview Tim Feemster, Managing Principal at Foremost Quality Logistics, stated, “Supply chains will have to adjust. Organizations with global supply chains are realizing that regionalization makes sense, because costs are reduced and speed to market is faster.”

Terri Hiskey (@terrihiskey), Vice President of Global Product Marketing for Manufacturing at Epicor Software, agrees supply chains need to adjust to this new VUCA world. She writes, “Having a solid supply chain strategy to navigate supply chain disruption is crucial — both to offset the impact of tariffs as well as handle the inevitable and seemingly myriad geopolitical disruptions, natural disasters, and transportation challenges.”[6] She continues, “Organizations need to put in place new short- and long- supply chain strategies. Supply chains that have been designed to function in an age of globalization are now under tremendous pressure to be made more localized to minimize trade conflicts. While many organizations have seen benefits in consolidating suppliers in recent years, many are now looking to establish multiple suppliers in different locations and with different delivery routes. While this may increase costs and operational complexity in the near-term, it can be advantageous to mitigate disruption in the long-run and support growth.” She recommends companies take the following steps to help adjust to today’s business environment:

  • Assess your supply chain state of affairs. Quantify exposure for the extended supply chain by material, country of origin, and financial impact.
  • Calculate key considerations. Evaluate inventory policy, sourcing modifications, and commercial terms. Consider where and when multiple sourcing options make sense.
  • Review as situations warrant. Ensure scenario planning is done periodically.

She concludes, “Strategic use of technology can empower organizations in the efforts outlined above. Using technology such as enterprise resource planning (ERP) and/or supply chain management (SCM) systems to support supply chain operations is a solid step to improve visibility and flexibility. … These systems are increasingly being augmented with artificial intelligence (AI) which can be especially beneficial in helping detect fast-moving trends and look for patterns from which to discern insights.”

Concluding thoughts

As President and CEO of a cognitive computing firm, it comes as no surprise that I agree with Hiskey about the value of artificial intelligence in helping supply chain managers deal with global VUCA conditions. The Enterra Supply Chain Intelligence System™, powered by the Enterra Enterprise Cognitive System™ (AILA™), can help generate the kind of actionable insights decision-makers need to function in what Hiskey calls the Age of Uncertainty. As Miles noted, VUCA is the new norm and it’s time supply chain managers “vuka” to that reality.

Footnotes
[1] Trevor Miles, “VUCA, a useful acronym for today’s supply chain,” The 21st Century Supply Chain, 9 June 2011.
[2] Mike Mortson, “What Exactly Is Supply Chain Management? 10 Different Definitions!Supply Chain Game Changer, 13 November 2018.
[3] Muddassir Ahmed, “What is Supply Chain Management? A Technical and Academic Definition,” SCM Dojo, 22 August 2016.
[4] Rich Weissman, “Econ 101: In turbulent times, supply chains must take notes,” Supply Chain Dive, 17 December 2018.
[5] Kate Vitasek, “Supply Chains And Adjusting To Trump: Think Local And Global,” Forbes, 20 March 2017.
[6] Terri Hiskey, “How to Improve Your Supply Chain Strategy in an Age of Uncertainty,” Supply & Demand Chain Executive, 17 December 2018.