When the coronavirus pandemic in 2020 catastrophically caused a sudden global economic recession, enterprises went on the defensive to keep their businesses afloat; executives promised stakeholders they would transform their organisations to become more resilient.
Risk management was the popular precursor to resilience. In risk management, managers laid out possible threats and prepared for them. A factory would invest in fire-fighting equipment, for example, and trained personnel in fire safety & prevention. An office would install state-of-the-art cyber-security software to protect itself against computer viruses and malware. But as much as a factory prevented fires and an office stopped cyber-threats, an enterprise couldn’t anticipate all risks, much more so when it came to supply chains.
Supply chains cross through enterprises and thus make it difficult for executives to anticipate and mitigate risks for operations and links not within their spheres of influence. Executives, thus, turned their focus from identifying threats to gearing their organisations to coping with disruptions. Executives may not know what disruptions are coming but they believed they could improve systems to bear with them, much like a ship battening down its hatches to go through any storm or a house-owner laying down a strong foundation to endure any strong earthquake.
The enterprise had to be supply chain resilient, that is, it had to somehow be able to cope with whatever disruption will happen. Whereas supply chain risk management is about identifying and preparing for threats, supply chain resilience is about improving systems to cope with all sorts of changes.
Resilience, therefore, became a popular buzzword for businesses especially those reliant on supply chains. Not wanting to be hit hard by the next coronavirus surge, natural disaster, or transportation disruption, enterprise executives executed resiliency strategies such as building up inventories, increasing manufacturing capacities, and sourcing materials from multiple vendors.
Enterprise executives learned, however, that strategies for resiliency can and do lead to trade-offs with profitability and growth. When North American retailers such as Target and Walmart built up inventories in the wake of supply chain transportation delays from 2021 to 2022, they found themselves ending up with more stocks of items that didn’t sell as fast as they thought they would. The retailers didn’t anticipate changing demand patterns as they prioritised having stock in the wake of the coronavirus pandemic and global transportation disruptions. They ended up paying more in wasted effort and resources.
From risk management to resiliency, enterprise executives have forgotten about productivity. Productivity is about how much we achieve versus how much we put in.
Michael Mankins seems to describe productivity best when he compares productivity against efficiency in his Harvard Business Review article. He defines efficiency as ‘doing the same with less’ resources, while he defines productivity as ‘doing more with the same’ resources. Mr. Mankins promotes the ‘productivity mindset’ which he believes if adopted by business leaders, will lead to top-line growth.
Productivity, however, is not a popular buzzword in the business community, more so among supply chain managers. One does not see productivity often in mission statements, even among industrial engineers, who used to champion the term in the 1980’s.
Instead, many people equate productivity with labour performance or how well we manage our time. Not many people see the view such as that of Michael Mankins in which productivity is about getting more from a fixed input of resources.
Productivity is like velocity, which is not speed or about how fast we are going with what we have or with less but how fast we get to our destinations with what we have. It’s about setting challenging objectives and doing better than expected with the resources we allocated.
Resilience’s worth is in the productivity that results from it. An enterprise that has resilience but has no productivity will not go anywhere; it won’t be profitable and it won’t grow.
What both resilience and productivity have in common are that there is no single performance measure for either of them. As much as executives extol resilience, there is no universal metric for it. When executives say they want resilience, they usually actually mean they want their businesses to be stable & steady profitably.
Productivity also is more of a concept than a goal. Its measure, like resilience, is in the results, as in profit & growth and also in areas such as delivery timeliness & completeness, customer satisfaction, low costs, and market share dominance.
Resilience and productivity are buzz-words but the former has become more popular while the other has been relegated largely to worker performance and individual time management. Resilience, however, works only if there is productivity. Both are not measured by universal metrics but by the results desired by enterprise stakeholders.
Executives may want their supply chains to be resilient in the wake of frequent and damaging disruptions but they can’t go anywhere unless they link resilience with productivity. They already do ask for productivity and resilience in the results they want; the idea is to find good solutions to achieve them.
Ellery's Essays 