VUCA: The new complexity in the supply chain

By Gerald Scheffels

Who likes it simple and clear will feel rather uncomfortable in the actual global economic situation. The acronym VUCA characterizes the current situation of supply chains and industrial production in general. The four letters stand for Volatility, Uncertainty, Complexity and Ambiguity. This exactly describes the present condition of the supply chain.

Due to various disruptions, companies have to pause and their customers can no longer produce. There are shut downs of ports, ships for the world trade are jammed, containers are in short supply and cable harnesses and other raw materials, for example for the battery and semiconductor industries, are also becoming scarce. Moreover, due to the latest developments, the medium-term energy supply, especially with gas, is uncertain. International logistics is enormous out of joint, the supply and delivery chains do not function as usual.

Increasing instability in the value chain

To be fair, the term VUCA, which has come into vogue now, was already coined in the 1990s. So nothing new under the sun? Does the industry only now realize how complex and unpredictable everything is? It’s not like that. Rather, uncertainty and complexity have accelerated considerably in more than 25 years. The supply chain has once again become significantly more unstable. And currently, several "major events" are coming together that create additional uncertainty.

And – experts agree – it will not get any better. For planners, buyers, managing directors and other decision-makers, this means: There is an urgent need for action to make the company fit for the future.

What to do? Observe closely and become more agile!

How this should be done? Two things are particularly important here.

• First: Monitor the situation and take countermeasures – through mindful observation, careful planning and consistent action.
• Second: Develop the company and its structures focused in the direction of agility. If the situation is confusing, the speedboat can react better than the tanker.

The "mindset" of those responsible must also change

To make a company more agile, it is not enough to introduce a new process or restructure the company. Rather, the "mindset" of those responsible must also change. In concrete terms: Decision-makers must always anticipate changes and have a plan B for everything conceivable and unthinkable. They should plan reserves, such as supplier products, spare parts, personnel and time. Because distances could become longer and resources scarcer, or important parts could suddenly no longer be available for delivery.

In the past, this aspect – key words (cost) optimization, competitive pressure, globalization – has increasingly been pushed into the background. The consequences are now visible: supply chain processes are often "sewn on the edge". They can be disturbed even by relatively minor impairments.

Use of the right software

As important as the right "mindset" is a digitization strategy, which is ultimately a software strategy when it comes to supply chain optimization. If all relevant workflows and processes are digitized, i.e. mapped in software, they can be better planned, controlled and monitored. And the user has a good tool for the "early detection" of irregularities in his hand.

Many readers will now think: "Software that maps processes? We have that!" – and feel perfectly prepared: Everything done right! Unfortunately, most of the time it's not quite like that. End-to-end IT systems (ERP, MES, PPS...) are already good, but not a panacea. They can (and should) be further optimized by tools, e.g. for monitoring the supply chain – so that the user can keep a close eye on the complete supply chain and act quickly if necessary.

Goal: A stable and flexible supply chain – despite VUCA

How can this goal be achieved? You can discuss this with experts at the GIB SUCCESS DAYS 2022. The SCM symposium will take place under the motto "stabilize. balance. reimagine. More stability for your supply chain". There you will learn how VUCA can impact your supply chain, what challenges you will face in the future, and why it is so important that you start preparing now.

The key question, of course, is: How must companies and the processes be structured in order to be stable and thus "future-proof"? The answer is, hard to believe, also VUCA. But here the letters stand for Vision, Understanding, Clarity and Agility. If you implement this guiding principle – in mindset and also in IT – your supply chain will become more stable, elastic, flexible and less prone to disruptions.

The software manufacturer GIB advises you on this way.