Koray Köse is a supply chain expert, tech futurist, author, former Gartner analyst, and now Chief Industry Officer at Everstream Analytics.
Supply chain disruptions do not occur in isolation. The confluence of multiple challenges, including geopolitical tensions, wars, cybersecurity threats, climate change effects and resource scarcity, affect global supply chains in concatenation. When multiple events occur concurrently we refer to that as “polycrisis.” When these disruptions intersect, they amplify their collective threats and impacts.
Today, polycrisis is characterized by a shift towards multipolarity, marking the end of the Cold War’s duopoly dominance and the subsequent decades of globalization having shifted the powers. This change has created a landscape in which economic, political and ideological factors clash with global trends, such as technological breakthroughs, climate change and factional opportunism, leading to increased competition and shifting alliances. For example, conflicts between Russia and Ukraine and China and Taiwan, or contention over limited resources in fragile regions such as Africa, have significant impacts on supply chains.
As crises are erupting continuously and the world is operating more interdependently, we are experiencing a new level of sophistication in supply chains with wider reach and more value chain participants being impacted. One event can impede or increase the velocity of another, amplify the impact, reach and duration. To summarize an old saying attributed to Vladimir Ilyich Lenin, “There are decades where nothing happens; and there are weeks where decades happen.” We are living through unprecedented times with manifold challenges coming down with high velocity, creating an environment of rapid change and omnipresent uncertainty.
Supply chain leaders often adopt a reactive approach, analyzing interdependencies only after a crisis has occurred. It’s time to shift our perspective from crisis management to holistic risk management, boosting resilience and transforming value chains to be able to anticipate, utilize and manage disruptions to their benefit, rather than acting as first responders. It’s time to unlearn what decades of false business continuity management pushed organizations to focus on.
Strategies For Managing Multipolarity Challenges And Boosting Resilience
It’s important to be aware of the different factors that may converge to affect your business’ supply chain in the coming months and years, including geopolitical conflicts, geoeconomic weaknesses and protective and regulatory measures. Learn to evaluate, sort and prioritize them, individually and as a whole. Going from crisis to crisis depletes the resources and risk capacity of an organization, whereas prioritizing and preparing maximizes both effectiveness and efficiency of an organization’s capability to navigate terra incognita and come out of disruptions as leaders.
Here are four key immediate actions that can augment an organization’s business success:
Backcast
Instead of forecasting, embrace backcasting as a technique to envision and prepare for future scenarios. With backcasting, you start with fixing the future with alternative scenarios and comparing them to the organization’s current state and desired outcomes. This gap analysis is the foundation to work backward to the actions you would need to take in the present to achieve the future desired outcome, given the prioritized alternative scenarios. Backcasting in supply chain is critical to assess your organization’s current state of resilience, risk and innovation capacity, agility and ability to adapt and remove guesswork.
Create Customized Regional Strategies
Recognize that a one-size-fits-all approach won’t work. Tailor your supply chain strategies to specific regions, considering local customs, ethics, market requirements and, most importantly, geopolitics and geoeconomics.
For example, you may be concerned about tensions between China and Taiwan but decide not to move your manufacturing out of the region. Instead, you could create a strategy that protects your assets and investments in China and also establishes alternative supply chain sources in Latin America or Europe. Following mainstream actions are not a guarantee for success; as an alternative, create a fit-for-purpose approach aligned with your organization’s individual abilities and stakeholder expectations. Ensure that your strategies are aligned with the time frame of your decisions’ lifecycle and the level of volatility in the key variables you use for prioritization and subsequent actions.
Engage In International Initiatives
Recognize that your company can’t solve multipolarity challenges alone. However, that doesn’t mean you should just watch and observe what is happening around you. Instead, engage in international initiatives and collaborate with government, competitors and supply chain organizations to be part of the solution. Taking initiative, injecting ideas and influence and lobbying for strategies and solutions are key in volatile times. Only a proactive approach may put your organization in the position to benefit from a first mover advantage, such as receiving subsidies and incentives for new investments, synergies from collaborations and preferential treatment in complex multilateral agreements
For instance, Intel is investing $33 billion to develop two chip-making plants in Germany as part of its European expansion plan, creating tens of thousands of jobs and receiving $10 billion in subsidies, despite existing German competitors with home-turf advantages.
Self-Disrupt
Embrace technological disruption by incorporating emerging technologies early and aggressively into value creation and value chain orchestration and reinventing important elements of your company, prioritizing agility, resilience and innovation. Create a flexible IT environment in which you control, design and execute holistic risk management to get the most out of disruptions. Microsoft is a prime example of this type of self-disruption. Starting in 2019, Microsoft invested several billion dollars in OpenAI, the company that launched ChatGPT. When other tech companies were worried about artificial intelligence technologies disrupting their businesses, Microsoft embraced it and created a significant competitive advantage.
The relationship between supply chains, geopolitics and geoeconomics is inseparable. Historical events, from wars to economic downturns, have always been intertwined with resource allocation and supply chain conflicts. As we explore new ways to manage the risks associated with polycrisis and the shift towards multipolarity, we must also identify opportunities to evolve, adapt and thrive in an environment where the only constant is change and uncertainty. The answer to this is relentless holistic risk management enabled by investments into resilience—specifically in emerging technologies such as AI, graph technology and advanced analytics, as well as advanced processes such as backcasting and trendspotting and new ways of talent development. These investments are critical and urgent and require a politically savvy approach of persuasion and influence because they carry the key to unlock global, sustainable and resilient competitiveness.
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