A year into the pandemic and there’s one thing just about every supply chain exec recognizes: We need to make some changes to ensure greater resiliency. Yet few are clear on exactly what changes to make. Other than looking to diversify sourcing locations, something that was in fact underway prior to the pandemic, there are more questions than consensus on what specific action to take. People talk about ‘digitizing’ but that covers a wide range of possible implementations. “A company’s performance and response to COVID-19 has become a litmus test for understanding the potential pitfalls associated with their current strategy and approach to risk management in times of global crises,” KPMG said in a recent report. The challenge for companies will be to make their supply chains more resilient without weakening their competitiveness, according to Harvard Business Review. <h3><b>No, It’s Not Just About Digitizing</b></h3> While COVID-19 has made the need for digital transformation more urgent for brands and manufacturers, they are having varying degrees of success, and many are not sure how to proceed, according to a new survey from Information Services Group (Germany). “In many places, there is considerable caution about how much to adjust business capabilities to more safely manage the impact of the pandemic,” says ISG Partner Christian Decker, leader of the firm’s EMEA Smart Manufacturing practice. “Only a minority of respondents to our survey have decided to try a new approach.” Most of the companies do not see a strong need to adapt their digital transformation roadmaps, the survey finds. However, the pandemic has raised cost efficiency to a higher priority among the respondents. That could be challenging. <a href="https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management.png" data-elementor-open-lightbox="yes" data-elementor-lightbox-title="DDTCr-preparing-for-better-risk-management"> <img src="https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management.png" alt="" loading="lazy" srcset="https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management.png 2040w, https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management-300x92.png 300w, https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management-1024x314.png 1024w, https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management-768x236.png 768w, https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management-1536x471.png 1536w, https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management-750x230.png 750w, https://insidefashionlive.net/wp-content/uploads/2021/01/DDTCr-preparing-for-better-risk-management-1140x350.png 1140w" sizes="(max-width: 2040px) 100vw, 2040px" width="2040" height="626"> </a> (click on chart to enlarge) <h3><b>Reducing Risk While Remaining Competitive</b></h3> Even before the pandemic there was a rise in economic nationalism. However the pandemic has heightened political pressure to source more products domestically and grow employment in brands’ home markets. Sourcing domestically is seen on the one hand as contributing to risk management, but on the other, potentially higher costs could make brands less competitive. According to Harvard Business Review, “Consumers will continue to want low prices (especially in a recession), and firms won’t be able to charge more just because they manufacture in higher-cost home markets. Competition will ensure that. In addition, the pressure to operate efficiently and use capital and manufacturing capacity frugally will remain unrelenting.” By applying metrics such as the impact on revenues if a certain source is lost, the time it would take a particular supplier’s factory to recover from a disruption, and the availability of alternate sources, can give you a better indication of where your supply chain vulnerabilities are, according to MIT’s David Simchi-Levi. For a growing number of brands or manufacturers, working more closely with third party (3P) specialists will be the way to achieve greater flexibility with also managing costs.