5 supply chain strategies to prepare for inflation & potential recession

As the saying goes, there's no rest for the weary. Even with the supply chain impacts of COVID-19 winding down, another threat looms on the horizon. Recession, the once-in-a-decade crisis that disrupts lives and transforms global commerce, is possibly looming. Inflation rates are skyrocketing. Currency values are plummeting. Discretionary spending is slowing. It's time to brace for changes that will have a lasting impact on your business and your supply chain.

But preparing for change does not have to mean bracing for the worst. Readying your supply chain for the recession now will give you the opportunity to thrive through disruption and chart a brighter future for your company for years to come.

1. Make the business case for change

Recent experiences have revealed the risks of impaired supply chain performance, particularly to the C-suite. In a 2020 McKinsey survey, 92% of supply chain executives said they intended to make supply chains more agile as a result of pandemic-related demand and supply disruptions. However, one year later, executives reported taking measures that added costs and risks for businesses and exacerbated supply chain challenges. These included increasing inventories and taking steps to regionalize production.

Resilience and agility aren't out of reach, though. As businesses prepare for the next round of disruptions, they are looking to another set of supply chains for inspiration. During the pandemic, businesses with advanced supply chain planning practices and technologies grew revenue by 2% – that's compared to a 3% decline for their industry peers.

These companies also saw their stock price increase by three times more than the industry average. Recent research has shown that even after peak pandemic disruption, these companies continued to see higher revenues and better performance across key financial metrics like return on assets (ROA) and costs of goods sold (COGS), among others.

2. Reduce initial cost and risk

70% of digital transformations fail, and C-suite executives are hesitant to put their companies and their careers on the line. The endless waves of global disruption are pulling supply chains under, creating unpredictable cash flows, overstretched teams and intense pressure to keep customers happy without increasing costs. Staying afloat as inflation rates rise and a potential global recession looms means the cost of doing nothing is too high

The key to success throughout these shifts is the adoption of concurrent planning techniques. Concurrent capabilities increase the agility of your supply chain by removing functional silos and eliminating reliance on Excel-based planning. They bridge the gap between planning and execution by interweaving every aspect of your business – from strategic to tactical. With end-to-end transparency, your planners know sooner and act faster, giving them the agility to respond to disruptions in real time.

These changes are not only transformational to your supply chain planning processes and business; they also drive results quickly and can be implemented in as few as 12 weeks. You can reduce risks to your supply chain today, ensure your business is recession-ready for 2023 and build the foundation for future success.

3. Manage change

As with any major business transition, it's imperative that companies understand what will change and how it will impact their teams

With limited recruitment budgets available, it becomes critical to focus a dedicated team of individuals in key functions within the organisation. Businesses may need to identify and mobilise the sponsor, ambassadors, first-line support and internal training team – and prepare them to deliver ongoing support activities in a timely and disciplined fashion.

4. Build the roadmap for success

Roadmaps help engage key players and align them in pursuit of a shared narrative, making it easier for stakeholders to pinpoint potential areas capable of attracting funding or other forms of support. How supply chain capabilities are prioritised will depend on (1) major pain points or opportunities in the current process, (2) the level of maturity of the capabilities, (3) the dependencies between the different capabilities and (4) the amount of investment available for the supply chain transformation

To create a holistic roadmap, you'll need to consider all aspects of your supply chain – as it relates to S&OP, demand planning, supply planning and inventory management. Inputs from different supply chain functions and disciplines will provide valuable insights, particularly when implementing the roadmap.

Ensure that the appropriate representative and resources are involved to drive the maximum value for your organisation.

5. Create gains that outlast a recession

Companies that embark on a concurrent planning journey now will discover it's not just about surviving as a business, but thriving. Supply chains have increasingly become a strategic lever, supporting other company-wide initiatives like meeting sustainability and emissions objectives, accelerating integration after acquisitions, opening operations in new markets and more.

Establishing a foundation for agility and end-to-end transparency ensures that the supply chain informs better decision-making across the business and empowers decision-makers to act in a timely, impactful manner. 

Conclusion

The next three years will be more challenging than any we've seen in a long time – very different even than our recent pandemic-stricken past. The good news is the sooner advanced planning solutions are in place, the sooner businesses will have the power to avert possible revenue loss and see performance metrics materialise.