Given the steady increase in disruptions hitting our enterprises and their rising costs, it is time for us to recognize that our digital solutions often pile capabilities on top of one another without considering the ability of our organizations and enterprises to combat and recover from disruptions.
Disruptions are a daily part of life—often serving as the catalyst for innovation or rapid unplanned change. In business, disruptions range from malicious hacks, sudden shortages, logistics problems and climate change. When taken in aggregate, they are as constant and varied as the surprises in life itself.
As our understanding of disruptions grows, it becomes evident that resiliency—the ability to overcome and even benefit from disruptions—is a critical strength for enterprises. Until recently, this was not always appreciated. However, this view is now shared by Washington, where the inaugural meeting of the White House Council on Supply Chain Resilience took place in late November 2023.
This council, which grew out of the 2021 Supply Chain Disruptions Task Force, announced thirty new actions that will span across 19 federal agencies including Commerce, Transportation, Defense and Homeland Security.
The idea of using software-enabled business solutions to address anything so universally entrenched and unpredictable as disruption may, at first, seem ludicrous. But even some of the largest problems can be remedied if broken into manageable pieces. This perspective is equally applicable to disruptions in supply chains, prompting my focus on the increasingly urgent need to integrate supplier data into enterprise product lifecycle management (PLM) software and strategies.
What is Resiliency and Who can Tackle it?
Resiliency is the risk-tolerant capabilities needed to recover, or seize the unexpected opportunity, from disruptions. However, this definition only brings more questions:
- Can resiliency be measured?
- How much does it cost?
- What resources, and how much of them, should be allocated to build resiliency?
- When do we have enough resiliency to foresee and recover from obvious disruptions?
- Do we even know what 'enough' means?
- What about the disruptions we don't foresee?
- How do we know if we have recovered from a disruption: how would that be measured?
Remember that disruptions tend to spread rapidly in lean, tightly integrated companies so answering these questions now, when things are stable, is imperative.
Building an organization's resiliency is a daunting challenge and requires a proactive approach, so the sound and sensible first step is to set up a resiliency task force. I urge the task force to focus initially on the supply chain, where disruptions worsen.
Supply chain disruptions range from obvious to obscure, from losing a key supplier due to a natural disaster. As we have seen in microchips, lithium ores and so much else, disruptions underscore the imperative of embedding resiliency into the entire enterprise.
Some sources of disruption include:
- Hacking in all its malicious forms.
- Sudden unavailability of key parts, halting production or forcing redesigns.
- Abrupt changes in customer demand and financial health.
- Unexpected sharp price hikes and inflation.
- Transportation problems with ships, trucks and freight trains.
- Just-in-time (JIT) inventory management that prioritizes minimal inventories and costs.
- Over-preventing shortages.
- Bad priorities like an overwhelming focus on cost savings.
- Climate change and geography which affects flooding, tornados, snowstorms, droughts and more.
Can an organization really foresee disruptions? Yes, for the most part, by asking classic journalistic questions, like:
- Who or What will trigger our next disruption and the ones after that?
- Where will these disruptions come from?
- When will they strike?
- Why, as in what underlying events will generate disruptions?
- How can the costs of disruption be calculated? And can recovery be assessed in some better way than the rear-view mirror?
The key to answering many of these questions is hidden within PLM solutions.
Supply Chain Resilience is an Enterprise-Wide Project
Given the frequency and extent of disruptions, JIT supply chains and least-cost inventory management must be reconsidered in the broader context of optimizing the end-to-end product lifecycle. In other words, supply chains, the bills of materials (BOMs) they propagate and their users can benefit from PLM's digital twins, digital threads, end-to-end bidirectional lifecycle connectivity and big data analytics. Purchasing and procurement departments — that build and manage supply chains — can also benefit if they are integrated into an enterprise's overall PLM environment.
This PLM integration will necessitate that supply chains are less tightly controlled by finance and enterprise resource planning (ERP) systems. This is beneficial as some traditional systems are too narrowly focused on transactions instead of the what-if analyses required to swiftly identify, resolve and minimize disruption.
In many cases disruptions are vague. In these instances, PLM's digital twins will often have nothing physical to represent. As a result, their numerous digital threads won't have any data to connect. Nevertheless, I advocate switching from a reactive to a proactive stance because some disruptions can be recognized in advance and thus prevented or mitigated. Carefully focused PLM strategies and their associated digital solutions can enable decisive action when early indicators arise.
Part of this proactive approach includes the realization that disruptions can strike anywhere, at any time, requiring resiliency to permeate the entire enterprise. Building this resiliency requires close collaboration between PLM managers, security, IT, top management, finance, and purchasing and procurement.
PLM’s Role in Addressing Disruptions and Building Resiliency
For years, we have been hearing about worsening supply chain difficulties and sudden shortages; these disruptions seem to be the new normal. On the brighter side, PLM-integrated supply chains can do a better job of supporting product development and all the other enterprise functions that rely on external suppliers. This will hopefully reduce the risk of sudden halts in the production of new and old products, systems or assets.
Integration with PLM not only enhances supplier collaboration but also provides a single source of truth for identifying and managing key suppliers. This helps the enterprise better understand and track supplier capabilities, quality, performance and risks (e.g., reliance on single-sourced parts, components and systems).
This integration emphasizes the need to bring supply-chain management into PLM environments. It is critical for ensuring resiliency as disruptions can strike any part of the organization, from human resources to the executive suite. And the more tightly integrated the organization, the greater the pain of disruptions. This is why purchasing, for example, must no longer be a support function, stand-alone department or other organizational stepchild. Everything must be connected.
Unmatched by any other strategic and holistic business approach, PLM and its enabling digital solutions provide users with enhanced visibility up and down supply chains and into their data. This includes purchase orders, BOMs, Bills of Information (BOIs) and more data that is generated outside the organization from suppliers, contractors and partners.
Extending PLM into the supply chain and the departments that handle purchasing and logistics will not magically confer resiliency or make disruptions disappear, but it will provide organizations with more resources to handle them. Security experts will need to identify likely sources of disruptions, other worrisome vectors, and how peers have recovered. IT experts then need to code these findings into the PLM environment for reference. Top management must ensure that staff and funds are available to address these disruptions and to understand that resiliency will never be "done."
Additional benefits of moving the supply chain into the PLM strategy and environment include facilitating easier access for all users and fostering better collaboration within and between engineering, production, services, partners and suppliers.
What a PLM-Enabled Supply Chain Will Look Like
PLM-enabled visibility helps the organization reduce risks and minimize disruptions, making it feasible to connect BOMs and specifications with the broader supply chain and the entire enterprise—from production, development and engineering to operations, sales, service and so on. This connection must include a product's initial concept and ideation through to the end of its useful life.
This visibility, made possible by PLM, will dispel misconceptions that supply chains are quasi-independent and stand-alone or that purchasing is responsible only for inventory control and answer only to finance.
In addition, the overall enterprise and everyone in it gains visibility into managing and optimizing the product lifecycle. They also gain support to proactively assess and evaluate risk via alternate components, new suppliers and more. Users also gain decision-support as to how to act when disruptions occur.
As time passes, PLM extensions and additional implementations will play vital roles in building an enterprise's supply chain resiliency and recovering from the disruptions everyone knows are ahead—it is just a matter of time. I cannot overstate the potential costs of not bringing the supply chain into PLM.