Unless you have been living under a rock, then you have heard quite a lot about supply chains over the past few months. I don’t think I have ever known so much about how ports function, the different elements of a supply chain, or how chassis are managed.
What we are learning is that supply chains have been optimized for profit and efficiency. For example, a container ship coming into the port of LA has to arrive at just the right time, so everything flows perfectly until the containers leave the port for their next destination.
The trouble is that this “just-in-time” design has proven to be incredibly fragile in uncertain times. Fragile systems will eventually break. Are your decisions fragile or resilient?
Fragile Decision Systems Only Work in Good Times
The pandemic has shown that fragile systems aren’t all they are cracked up to be. Zillow recently announced that that they are leaving the house flipping business. Their ability to purchase houses and then flip them depended on a machine learning algorithm that worked well during “normal” times. Add a volatile housing market and everything collapses.
Any company can make things work in good times. However, good systems may be an afterthought when demand is high, and the money is rolling in. If you have Steph Curry on your team, you don’t need a sophisticated basketball strategy. Just give him the ball and let him score 30 points in a quarter.
What happens when Steph Curry is sick or when your perfectly designed model encounters the unpredictable? That’s what many companies are now trying to figure out. We can also see that uncertainty and “once in a lifetime” events are increasing. Blame it on climate change, human complexity, or any other factors. Volatility is the norm, not the outlier.
You Need Resilient Decision-Making Systems
Good decision-making systems are resilient. They won’t buckle down under pressure. Resilience comes from optimizing around multiple variables: profit, efficiency, customer satisfaction, employee happiness, and others. For example, supply chains were optimized primarily around profit and efficiency, but they sacrificed their ability to deal with unpredictable situations.
British Columbia (my province) is currently starting to see tangible effects from climate change. We broke heat records in the summer, and we are now dealing with floods after breaking rain records. Unfortunately, every time an unusual event happens, things break. Our weather systems aren’t resilient despite the continual evidence of their importance.
At some point, we can’t keep saying that an event is unpredictable if it keeps happening to us. Businesses need to think about resilience in their systems. Otherwise, you may find yourself taken away by the current.