By Stephen DeAngelis
Supply chain risk managers have a dilemma. Journalist Thor Benson reports that tuning out bad news might be good for their mental health; however, risk managers know tuning out bad news wouldn’t be good for business. Benson writes, “You’re reading about the horrors of the Israel-Hamas war, and then you’re reading about the horrors of the war between Ukraine and Russia. You’re learning about the latest devastating climate news. Democracy is under threat in America. It can feel like everything is falling apart. This, of course, can have a significant effect on your mental health. You start to feel overwhelmed. Not only are you dealing with the regular stresses of daily life — your job, your finances, your personal relationships — but now you’re thinking about the most serious problems the world is facing. … According to psychology experts, this has become a serious problem. People are ingesting too much negative news, and it’s not only affecting them personally but impacting society at large. … Matthew Price, a professor of psychological science at the University of Vermont, says that stress is cumulative. One thing starts stressing you out, and then it’s another thing, and then one more thing. Suddenly, you’re spiraling. He says the stress can continue throughout your day even when you’ve stopped bingeing on bad news.”[1] That’s a problem when it’s your job to think about bad news each and every day.
Don’t Expect Any External Relief
Steve Riordan, Global Director of Consulting & the Supply Chain Capability Leader at Kalypso, insists, “Supply chain leaders must recognize that volatility will be a fact of life for the foreseeable future. Trade tensions are unlikely to dissipate significantly, COVID-19 echoes may last for years, climate change may get worse before it gets better, social unrest across the globe has not abated and numerous military conflicts continue to play out. All these significant forces will continue to have an adverse impact on both the predictability of demand and the execution of end-to-end supply chains. The quicker supply chain leaders recognize this new reality, the more likely they are to succeed in this environment.”[2] It’s not just bad news that can change the business environment. The Economist notes that technology can also be disruptive. The magazine reports, “Big technological shifts are nothing new. But instead of taking centuries or decades to spread around the world, as did the printing press and telegraph, new technologies become routine in a matter of years. [Before 2007], modern smartphones did not exist. Today more than half of the people on the planet carry one. Any boss who thinks their industry is immune to such wild dynamism is unlikely to last long.”[3]
Because volatility characterizes the new normal, Mike Mortson, CEO of Supply Chain Game Changer, asserts, “The job of a Supply Chain professional never stops. When things seem to be going smoothly there is always another problem looming around the corner. As such Supply Chain senses must always be on high alert! It is not a question of whether a new problem or challenge will occur. It is only a question of when that new problem or challenge will occur. The degree to which your Supply Chain’s senses are honed and ready will determine how quickly and efficiently that problem will be resolved.”[4] The question, of course, is how do you hone your supply chain’s “senses”? McKinsey & Company analysts, Fritz Nauck, Ophelia Usher, and Leigh Weiss, agree with Mortson that tuning out bad news is bad business; however, they also observe that preparing for every eventuality is unreasonable. They explain, “Ignoring high-consequence, low-likelihood risks can be damaging to an organization, but preparing for everything is impossibly costly.”[5] They add, “Some high-consequence, low-likelihood risks have to do with business strategy, such as those posed by the digital disruption; operational risks are another category and include serious quality-control failures in manufacturing. Missed opportunities are another equal source of extraordinary risk. Opportunities to adopt disruptive innovation can bring companies to crucial moments of truth, when movers gain significant market advantage over hesitant peers.”
Let Artificial Intelligence Help
I agree with the McKinsey analysts that preparing for every eventuality is unreasonable. However, artificial intelligence (AI) technologies can help companies better prepare for future volatile business environments. That’s why Enterra Solutions® developed the Enterra System of Intelligence®. The Enterra System of Intelligence merges cutting-edge analytical techniques with a business’ data and knowledge to Sense, Think, Act, and Learn® on enterprise data to meet the changing needs of the market. Enterra’s system acts as central “brain” within an organization, ingesting diverse datasets, business logic and practices, and strategy, to uncover unique insights and generate autonomous recommendations across the enterprise at market speed. The System of Intelligence provides a cross-enterprise analysis and control center. Having a cross-enterprise solution is essential. Lora Cecere, founder and CEO at Supply Chain Insights, explains, “The most significant factor to improve resilience (the organization’s ability to drive reliability of business results in the face of variability) is organizational alignment. While consultants wave their hands and tout new approaches, the most important step that a business leader can take today to improve future performance is the development of a shared vision for the organization on supply chain excellence. For organizations layered in functional metrics and driving a cost agenda, this is a tough nut to crack. Tougher than most understand.”[6]
Enterra’s system spans the data and process layers of established systems of record and engagement to autonomously scale optimization and data-driven decision-making across the value chain and fundamentally evolve an organization’s ability to drive growth, competitiveness, and resiliency. And, as the McKinsey analysts note, risk managers should be looking for opportunities as well as risks. They explain, “Some organizations have built business models around taking advantage of low-likelihood opportunities. … The models allow for fast movement when a high-consequence risk or opportunity occurs. Missing a high-consequence opportunity can lead to ultimate demise just as ignoring a risk can.” Letting AI solutions, like the Enterra Global Insights and Decision Superiority System™ (EGIDS™) — which is part of the Enterra System of Intelligence, run hundreds of “what if” scenarios in a short period of time can relieve supply chain risk managers of some of the stress associated with their jobs. Nauck and his colleagues explain, “The first strategic requirement that is often missing when addressing these risks is the identification of the risks that matter. This action, known as risk ID, is an important part of robust ERM [Enterprise Risk Management]. It means differentiating risks that could hurt the business from risks that could damage or destroy the company.”
Riordan agrees that “what if” thinking — or scenario planning — can be a risk manager’s best friend. He explains, “Supply chain leaders can develop a propriety point of view about the future for their company by developing three to four potential scenarios, which may range from optimistic to quite bleak. By exploring societal, technological, environmental, economic and political (STEEP) trends, as well as supply chain and industry sector trends, supply chain teams can construct unique future depictions of the world, the industry and their company. These teams can then identify the strategies and tactics they would employ which are common across all scenarios and implement them as ‘no regret moves.’ More tactically, teams can use the scenarios to take a fresh look at existing products and service portfolios and rethink how they can remove underperforming vendors or processes, potentially redesigning or replacing those that are susceptible to supply disruptions.” Systems like EGIDS can help organizations quickly explore dozens of variables that could affect future scenarios.
Concluding Thoughts
Bethany Teachman, a professor of psychology at the University of Virginia, told Benson, “We do need to stay informed, but when we move past informed to feeling overwhelmed and often paralyzed and feeling like we’re under constant threat, it’s clearly crossed over into a negative place. … It’s not about ‘this is a bad thing and this is a good thing.’ It’s about how you engage with it and how it fits in with the rest of what’s going on in your life. How are you living the rest of your life, and what are the impacts on that?” Benson concludes, “People are overwhelmed. They’re tired. Sometimes you want to just curl up in a ball and pull your comforter over your head. Teachman says that’s the worst thing you can do for your mental health. It’s important to connect with people to maintain your mental health, she says, and sometimes you can connect with people and be part of the solution to a problem at the same time.” By letting AI solutions do some of the heavy lifting when it comes to digesting bad news, supply chain risk managers can bring a better balance to their lives and better results for their business.
Footnotes
[1] Thor Benson, “It’s Time to Log Off,” Wired, 23 November 2023.
[2] Steve Riordan, “Volatility Is Here To Stay, Here’s How To Deal,” Supply & Demand Chain Executive, 13 April 2022.
[3] Staff, “The new normal is already here. Get used to it,” The Economist, 18 December 2021.
[4] Mike Mortson, “Supply Chain Senses Must Constantly Be On High Alert!,” Supply Chain Game Changer, 24 January 2024.
[5] Fritz Nauck, Ophelia Usher, and Leigh Weiss, “The disaster you could have stopped: Preparing for extraordinary risks,” McKinsey & Company, 15 December 2020.
[6] Lora Cecere, “Supply Chain Normalcy? Think Again.” Supply Chain Shaman, 18 April 2023.
