Adopt a New Supply

Chain Strategy to
Minimize Risk Impacts
Most organizations employ a three-pronged strategy to reduce the impact unfamiliar
disruptions have on their organizations: visibility, resilience and agility. These three
capabilities work together. Resilience ensures the supply chain has enough inputs
and options to fuel a risk response. Agility ensures the flexibility necessary to use those
inputs to respond quickly. Visibility ensures the supply chain senses risks early and
knows what the best response options are so that it can act accordingly.

Visibility: Access to transparent, accurate, timely and complete plans,

events and data to support effective planning and execution of supply
chain operations

Resilience: The ability of an organization to resist, absorb and recover from

a disruption in a way that minimizes the negative impact to its objectives

Agility: The ability to sense and respond quickly to an unfamiliar disruption

to reduce the negative impact it has on the supply chain organization

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Figure 1: Advantage of Visibility, Resilience and Agility
Illustrative

Full Reduction in risk Disruption

impact due to Responders
visibility, resilience Organizations
Readiness

and agility Without Visibility,

Partial Resilience and
Agility
Response ends
Disruption and path to full
recovery begins
Depleted
Month 1 Time Month 12

Source: Gartner
Note: A disruption is an unfamiliar risk event that actually impacts your organization.

The strategy reduces the impact of unfamiliar risk events when the supply chain cannot
reasonably develop response playbooks. Supply chain leaders know they cannot
predict which events will occur. They also know that even the best-laid plans will rarely,
if ever, remain relevant to a chaotic situation after an unfamiliar disruption occurs. For
that reason, supply chain leaders focus on improving their ability to respond after the
disruption in a way that reduces its impact. Supply chains with visibility, resilience and
agility will get to recovery faster while using fewer “readiness” resources (see Figure
1). We refer to supply chains that manage unfamiliar risks in this way as “disruption
responders.”
This strategy makes a lot of sense. Because these events are so rare, it is highly unlikely
that two high-impact disruptions would occur at the same time. In that situation, supply
chains would have plenty of time to recover long before another disruption hits — and
these strategies do shorten recovery time.
In this current environment, however, the high rate of disruption overwhelms the
strategy (see Figure 2). The supply chain never returns to a sufficient level of readiness
before another disruption occurs. This means that, as multiple disruptions impact the
supply chain organization, they continue to draw down their readiness to a point where it
may become depleted, which creates a risk of supply chain failure. The result is a forced
return to a reactive and unprepared response to disruptions, despite the investments
supply chains have made in visibility, resilience and agility.

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Figure 2: Impact of Current Rate of Disruption on Disruption Responder Strategy
Illustrative

Trade
Wars Record-
Full Breaking Disruption
COVID-19 Mass Responders
Hurricane
Season Protests
Readiness

Result is a
Partial Texas forced return
Freeze to a reactive
and unprepared
response to
disruptions.
Depleted
Month 1 Time Month 12

n = 262
Source: 2020 Gartner Supply Chain Signature Series Risk Survey

Given this change in the risk environment, the changes to the supply chain itself
over time, and the struggle supply chains are having to keep up with this high rate of
disruption, we did some research. Gartner set out to identify how leading organizations
reduce the impact this high rate of unfamiliar disruptions has on the supply chain. The
2020 Gartner Supply Chain Signature Series Risk Survey examined how well visibility,
resilience, agility, portfolio complexity and network design reduce the impact of risk
events on the supply chain.

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Disruption Shapers:
A New Strategy
As we analyzed the survey data, we compared leading organizations with others to find
out how they are different. Our analysis showed two important findings:
1. Organizations can reduce the rate of disruption to their supply chains — something
most supply chain leaders dismiss as even a possibility.
2. Organizations can strategically shape which risk events will disrupt them, effectively
reducing the number of disruptions they experience.

Supply chains can reduce the rate of disruption to their supply

chains. In fact, these disruption shapers are likely to experience
less than one-third of the disruptions their peers experience.

We call these organizations “disruption shapers.” Gartner’s survey shows that disruption
shapers are likely to experience less than one-third of the disruptions their response-
focused peers experience. That is a difference of seven fewer unfamiliar disruptions
per year on average (see Figure 3).

Figure 3: Comparison Between Supply Chain Organizations

Disruption shapers are likely to experience seven fewer unfamiliar high-

impact disruptions per year than their disruption responder peers.

9.5
More

Number of
Disruptions
2.5

Fewer
Disruption Responders Disruption Shapers
n = 262
Source: 2020 Gartner Supply Chain Signature Series Risk Survey

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Disruption Shapers Are Designed Differently
To find out more, we examined how disruption shaper organizations are different from
their peers. Surprisingly, disruption shapers and disruption responders are not different
in terms of their revenue, volume of products or volume of SKUs. But survey data does
show two main differences in movement and physical footprint (see Figure 4).
For movement, disruption shapers are significantly different from their peers in the way
their supply chains operate. In particular, they have fewer processes, sales channels,
touchpoints for orders, and countries and sites through which inventory passes. They
also have fewer third-party logistics providers, shipping modes and shipping lanes, and
they have greater distances between suppliers, factories, warehouses and distribution
centers. In terms of physical footprint, disruption shapers are also significantly different
from their peers. They have fewer Tier 2+ suppliers and fewer internal and external
manufacturing sites.
Put in different terms, disruption shaper organizations have smaller surface areas, and
this is the reason they are likely to experience fewer disruptions than their peers.

Figure 4: Impact of Different Variables on the Number of Disruptions Experienced

Disruption Disruption
Responders Shapers

No Revenue
Statistically
Number of Product Lines No Significant Differences
Significant
Differences Number of SKUs

Number of Processes Across the

Product Life Cycle

Number of Sales Channels

Number of Countries and Sites

Through Which WIP and Finished
Inventory Pass Greater Fewer Movement

Number of Touchpoints Through Which

Statistically an Order Passes Before a Customer
Significant Receives It Supply
Differences Chain
Number of 3PLs, Shipping Modes and
Shipping Lanes to Transport Products Surface
Area
Distance Between Suppliers, Factories,
Fewer Greater
Warehouses and DCs

Number of Tier 2+ Supplier Sources Footprint

for Materials
Greater Fewer
Number of Internal and External
Manufacturing Sites

n = 262
Source: 2020 Gartner Supply Chain Signature Series Risk Survey

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If the supply chain surface area is thought of as a target, it makes sense that smaller
surface area organizations perform better than their peers in this risk environment. With
a higher cadence of risk events, a smaller surface area is an asset, but a larger surface
area has become a major liability (see Figure 5).
In that sense of surface area as a target, disruption responders are, simply put, easier to
disrupt because they are a very large target. Understandably, they have responded to
the forces driving enterprise and supply chain expansion over the past 50 or 60 years,
never anticipating such a drastic increase in unfamiliar risk events. Consequently, their
surface areas are bigger. They have dispersed familiar risk across a vast network that
is spread out globally to optimize costs. Their processes are complex as a result of an
extended network, requiring much more movement within the supply chain. And it all
seems necessary in order to meet that changing customer demand.
Disruption responders experience more disruptions because their surface areas are
larger; they are disrupted whenever these risk events and their supply chains are in
the same place. This higher number of disruptions leads to the need for more and
more visibility, resilience and agility, capabilities that are difficult for any organization
to achieve. The situation is unsustainable in terms of cost, employee fatigue and
opportunity costs. Worse, these organizations risk loss of customer confidence and
market share. Eventually, some organizations may cease to exist at all.

Figure 5: Impact of Surface Area on Rate of Disruptions

Surface Extremely easy target for the

Area risk environment to disrupt

More
Harder target
Surface for the risk
Number of
Area environment
9.5 to disrupt
Disruptions

2.5
Fewer
Disruption Disruption
Responders Shapers

n = 262
Source: 2020 Gartner Supply Chain Signature Series Risk Survey

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Disruption shapers, on the other hand, have pursued these same strategies — cost
optimization, portfolio innovation and meeting changing customer demand — but
have managed to control the surface area of the supply chain along the way. They have
constrained movement, simplified processes and controlled the number of sites they
operate. That is, they have constrained the number of touchpoints risk events can have
with their supply chains. In doing so, they have reduced the rate of disruption to their
supply chains and are therefore better positioned for this risk environment.
Although supply chain leaders cannot control how many risk events the environment
generates, disruption shapers show us that they absolutely can control the size of
the target they want their organizations to be. It is that knowledge that informs the
disruption shapers’ strategic approach to risk management.

Although CSCOs cannot control how many risk events the

environment generates, they absolutely can control the size
of the target they want their organizations to be.

Disruption Shapers Strategically Reduce the Rate

of Disruption
Disruption shapers understand that the risk environment and the supply chain surface
area have both changed over the past several decades. They know visibility, resilience
and agility are helpful but not sufficient anymore because there are too many risk events
disrupting their supply chains. And they recognize that they can control the size of their
surface area. Therefore, they establish a risk management strategy that actively shapes
disruption rather than accepts disruption as a fact.
What do disruption shapers do differently? Figure 6 shows two key activities of
disruption shapers.
1. Embed Awareness Into the Overall Supply Chain Strategy
Disruption shapers embed awareness of this higher rate of disruption into their overall
supply chain strategy. They give it the same weight they would give to cost, quality or
speed. But they do not do this by abandoning the strategic business objectives supply
chains have typically been pursuing over the past 50 years.
Instead, they redefine cost optimization by adding the cost of constant disruption in
this environment to their current cost calculations. They understand that the pursuit
of innovation does not necessarily require an increase in surface area. When they
must increase it for innovation, they make design choices that diversify their total risk
profile and maximize their competitive risk advantage. They increase their reliability to
customers by understanding that this environment will make it harder and harder to
deliver reliable and profitable service. They act now to reduce disruption later.

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Figure 6: Disruption Shaper Mindset and Activities

Goal Reduce the rate of unfamiliar disruptions

Strategy Design unfamiliar risk out of the supply chain

Key Do integrate awareness of risk Do reduce the surface area

Activities environment into overall supply of the supply chain
chain strategy
• Simplify processes
• Account for incurred cost of • Reduce movement
disruptions from unfamiliar risk events • Diversify risk exposure in
• Pursue risk-aware innovation network design
• Increase customer reliability

Key Don’t sacrifice valuable outcomes Don’t over-expose the supply chain
Cautions achieved from past strategies to a single, catastrophic event
• Don’t increase costs • Avoid extreme consolidation
• Don’t stagnate on innovation • Don’t eliminate all redundancies
• Don’t reduce service levels • Don’t locate all sites in a single region

Source: Gartner

2. Reduce the Surface Area of the Supply Chain

The second key activity disruption shapers pursue is to reduce the surface area of their
supply chains. They reduce movement by simplifying and redesigning processes, and
they reduce their physical footprint by reducing the number of sites and suppliers in
their network. However, they are careful to avoid overexposure of the supply chain to
a single catastrophic event. They are not opting for extreme consolidation, but instead
opting for the right size for their organization to be. They balance exposure to the risk
environment with exposure to any single catastrophic risk event. In sum, disruption
shaping represents an intentional effort to reduce the rate of disruption to the supply
chain in this risk environment.
Disruption-shaping organizations benefit in multiple ways from the disruption-shaping
strategy (see Figure 7). First, the approach reduces costs to the supply chain because it
experiences fewer disruptions overall.
Second, by reducing the rate of disruption, the supply chain can once again leverage
visibility, resilience and agility to reduce the impact of disruption when it does occur. The
supply chain can return to the full recovery necessary for its response strategy to work.
Third, and perhaps the ultimate value gained by the supply chain, competitive
advantage is created through this strategic risk posture. Disruption shapers are ready
and waiting to service the customers that their closest competitors are losing because
those competitors are too busy responding to risks.

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Figure 7: Comparison of Disruption Shaper and Disruption Responder Strategy in Current
Risk Environment
Illustrative

Full Disruption
Shapers
Disruption
Responders
Readiness

Delta
Partial represents the
competitive
advantage

Depleted
Month 1 Month 12
Time
n = 262
Source: 2020 Gartner Supply Chain Signature Series Risk Survey

Supply chain risk management: How we help

Key tenets of supply chain risk management are enhancing resilience and improving
competitiveness. But supply chain risk management today must account for
unprecedented, fast-developing market disruptions as well as transformation inside
the organization, making it difficult to achieve agility and competitive advantage. To
succeed, supply chain risk management must be a collaboration between supply chain,
procurement and enterprise risk management (ERM) managers. Innovative technology
solutions and advanced analytics enable continuous review and integration of supply
chain risk management with the business. Gartner provides supply chain leaders with
insights, advice, data and tools to increase supply chain risk readiness. Visit gartner.com
to learn how we enable supply chain risk management to combat disruption.

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About Gartner
Gartner is the world’s leading research and advisory company and a member of the S&P
500. We equip business leaders with indispensable insights, advice and tools to achieve
their mission-critical priorities today and build the successful organizations of tomorrow.
Our unmatched combination of expert-led, practitioner-sourced and data-driven
research steers clients toward the right decisions on the issues that matter most. We are
a trusted advisor and an objective resource for more than 14,000 enterprises in more
than 100 countries — across all major functions, in every industry and enterprise size.

Gartner Support for Chief Supply Chain Officers

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