The post-COVID world looks very different for many organizations. Supply chain resilience has gained extreme importance in recent years. Organizations are facing unprecedented change in the environment they operate in, like changing customer needs, limited reliability on supply, rising cost of capital, to name a few. Lack of supply chain resilience to these issues can result in a gross margin dilution of as high as 5-10%.

As a result of all the volatility in the world, the key question clients often ask me is, "How can we enable supply chain resilience in these dynamic times?"

I'm Ritesh Gupta, from Oliver Wyman's Energy and Natural Resources Practice, with a focus on chemical clients. During my time as an MBA student studying supply chain and operations, and my early career in a manufacturing plant, where I was responsible for improving manufacturing throughput, I gained an appreciation for all the external nuances that can directly impact the productivity of that plant. This experience taught me that true transformation can only happen when we look at the entire network end-to-end, including your customers and suppliers.

For the next 18 years, I spent time working closely with my clients in the field of end-to-end supply chain planning and advanced analytics. At Oliver Wyman, I advise my clients to create supply chain resilience driven by improved planning. This has helped them transform their business and create a sustainable path for ongoing improvements.

There are three main areas that we found helpful for our clients to be successful.

Firstly, the ability to sense the changing customer needs. Only history is no longer a good determinant of the future, so looking at external variables to sense the customer needs is extremely important. For example, a paint manufacturer may look at the spending in the construction industry; or an industrials spares distributor may look at the active equipment base and its associated age. This is where advanced analytical techniques like machine learning can help digest all these external and internal variables and detect patterns that are not so obvious to the human eyes. We have seen this capability has helped our clients reduce forecast error by at least 30–50%.

Secondly, enabling the organization to dynamically adjust the optimal inventory targets as per the changing customer needs. To do this, we start by looking at the end-to-end inventory, including the raw material, components, and finished goods, and also the inventory held at your customers and suppliers. This is where advanced simulation capabilities can help look at the entire network and the data in real time and suggest what actions to right size the inventory at each SKU location. This method has helped our clients reduce inventory by at least 13–50%, while improving the service fill rate by 20–40%.

Lastly, the ability to dynamically optimize the production to accommodate the changing customer needs and optimize inventory targets. With today's changing world, supply planners have to assess millions of possible combinations to identify the optimal production flow path. It is extremely inaccurate and inefficient for an individual to make the best decision in such a short timeframe. To make these decisions, we help our clients develop optimization capabilities to enable quick decisions and take into consideration the customer requirements, the inventory requirements, and manufacturing and sourcing constraints. This has helped our clients improve their capacity utilization by 10–20% while achieving the target customer fill rates.

When working with clients, we guide them to keep a few things in mind and ensure that these three key areas create a sustainable and long-lasting impact. We encourage them to implement an integrated end-to-end data with a single source of truth and develop advanced analytical capabilities to consume all this data and recommend the best answer in real time.

We also recommend a robust operating model with clear roles and responsibilities, and governance on who will consume this information and execute the recommended actions. And last but not the least, we believe a robust compliance mechanism is vital to ensure that actions are being implemented on time.

In a nutshell, extreme volatility is here to stay, and it is exciting to help our clients adapt to this new environment. Those who figure this out sooner will stay competitive and top of the curve.

My name is Ritesh Gupta, and this is my take on supply chain resilience.

This transcript has been edited for clarity