The Quest for the Antifragile Supply Chain
2021 was a year of despair and disruption for the production and supply chain industry: in addition to challenges such as a historic truck driver shortage, the production and delivery outages of suppliers have fully hit their industrial customers in Europe and the US.
In this context, it’s worth considering a new angle on supply chain fragility: fragility’s opposite.
What does "antifragile" mean?
Antifragile is a term coined by risk analyst and statistician Nicholas Taleb and also the title of his 2021 bestseller. "Antifragile" refers to systems that can not only resist, but gain from adverse effects.
An example: if a strong wind blows a porcelain cup off a kitchen table, the cup will break (thus exposing fragility). An axe in a tree stump will survive the same wind undamaged (robust), but a dandelion flower can actually use the wind to its advantage and distribute its seeds. Thus, the dandelion will gain from the adverse situation and can be considered antifragile.
If you’ve ever done a morning workout before jumping into your office chair, you’ve already lived an example of antifragile behavior. Yoga, for instance, forces muscles to work against gravity, but also brings them the long-term benefit of improved strength and a reduced probability of back pain.
But while it seems fairly easy to train the antifragility of the human body, making a supply chain antifragile is a more challenging task.
How can a supply chain become antifragile?
A recent article in the Journal of Purchasing and Supply Management sheds some lights on what an antifragile supply chain might look like. The authors define it as a "Living supply chain that can gain from disorder.[...] It needs to embrace disorder and [continuously] learn from it rather than avoiding it."
What does this mean in practice? A lot of experimentation – like testing new suppliers or alternative transportation networks.
How to make your antifragility experiments successful
- Digitalization of key processes such as transport management or booking warehouse slots to (un)load goods. Surprisingly often these key activities are either done manually by phone or semi-digital (ad-personam emails that trigger human actions), which makes it hard to roll out process changes quickly. Furthermore, absences (such as those caused by COVID-19) can easily derail such manual processes. In 2021, Alpega has launched important features to remove personal dependencies from your logistics processes: with the "centralized order screen" feature in our Reusable Packaging Management solution, logistics consultants in plant A can take over the packaging order requests of plant B in case of absences. With the integration of Smart Booking into Alpega TMS, we offer a very user-friendly dock booking solution for your carriers that makes ad-personam contacts between the carrier and your logistics team obsolete.
- Use analytics to discover opportunities and detect threats. What percent of your orders come from one supplier? How many delayed deliveries can be attributed to one carrier? In 2021, we have greatly enhanced the reporting capabilities of our Smart Booking REST API, which allows you to obtain this information in an automated way and link it to transport data from Alpega TMS, giving you a lot of opportunities for data analytics.
- Determine the true root cause of supply chain problems in the past. Just because a problem becomes apparent in your supply chain doesn't mean it is a supply chain problem. A thorough root cause analysis can help to make the changes in the right place. The recent "chip crisis" of many carmakers is a good example: in 2021, they required outdated 70nm chips from chip makers that were current at the age of iPhone 1, and were yet surprised that the chip makers needed to move on and produce modern chips for today's laptops and smartphones. A more flexible embedding mechanism would have ensured that a chip generation switch doesn't mean a factory standstill.
Optionality & Eustress: Further techniques for building antifragile supply chains
Optionality
Optionality describes a situation that offers multiple choices to achieve a goal and also refers to the quality of those choices. If, for example, your whole supply chain relied on wooden pallets to transport goods, you'll likely curse 2021, because during this year the lumber price increased by more than 50% (due to heavy demand in building and renovation). Wooden pallets became expensive or even unavailable, because at times there was not enough lumber on the market to satisfy all needs.
But what if you trained your suppliers and production sites to work with pallets made from other materials, such as compressed wood chips or cardboard? Not every pallet type is applicable for every use case, but relying on just one raw material can make your supply chain vulnerable to market swings. Hence, increasing optionality in your supply chain processes might be one way to make it less fragile.
Eustress
Eustress, or motivational stress, is another interesting antifragile technique. By setting up meaningful, yet realistic challenges for your supply chain partners, you can help them to embrace a continuous improvement mindset and get rid of the "never touch a running system" mentality. It is important that the goals of these challenges are not just one dimensional (e.g. cost reduction), but address different benefits. One initiative to reduce inventory costs, for example, could be a disposition system that aims to minimize labor time spent on unloading trucks by using automation and modern tools.
When can I consider my supply chain antifragile?
Your supply chain never "achieves" antifragility – like any continuous improvement initiative, the concept of antifragility requires a constant "inspect and adapt" mentality to look out for risks and make your processes less susceptible to them. The reward is more stamina in adverse situations. If your supply chain is able to deliver products when your competitors can't, you'll gain significant advantage. And that’s a major achievement.
Building an antifragile supply chain is a challenging quest, and hopefully this article got you started thinking about how best to begin this endeavor. If you’re looking to take things a step further, please reach out to our dedicated supply chain experts.
Finally, a special thanks to Franz Buchinger, the author behind this blog post, which represents the combination of two of his articles that originally appeared on LinkedIn: