Adopting a risk-tolerant approach to supply chain management

From COVID-19 and bushfires to global trade tensions and cyber-attacks, 2020 has put pressure on supply chains. Our new white paper, developed with Deloitte, explains the four pillars of resilient supply chains and how your organisation can proactively address vulnerabilities and manage ongoing risks.

Key points

  • Supply chains around the world have been disrupted in 2020
  • An agile and resilient supply chain depends on four factors: visibility, flexibility, collaboration and control
  • By planning for supply chain disruption, you can be ready to weather threats and emerge stronger

The events of 2020 – from bushfires, cyber-attacks and trade tension to the global pandemic1 – have caused ripple effects across supply chains.

Eliminating risk is, unfortunately, not an option. However, by managing supply chain disruption your business may come out stronger on the other side. A new white paper Australia Post has co-authored with Deloitte, Supply Chain Resilience, Building confidence through a risk intelligent approach to supply chain management, shares a framework for doing so, underpinned by four pillars: visibility, flexibility, collaboration and control.

With this ‘risk intelligent’ approach and strategic improvements in key areas, you can bolster the agility and resilience of your supply chains and be better prepared for disruption in the future.

Weathering the storm

With online shopping volumes continuing to grow while COVID-safe requirements restrain capacity within distribution networks,2 being agile and resilient has never been more important. Two organisations can face the same threats but experience different outcomes.1

Resilience allows your organisation to quickly recover from threats to business continuity due to disruption. But agility allows you to quickly respond to opportunities and sudden changes in demand – which have been unpredictable during the pandemic, triggered in some cases by government policy shifts.2

The flexibility to adapt

Booktopia’s agility and resilience has helped it make the most of growth opportunities resulting from the COVID-19 lockdown in Victoria. For example, online sales in the arts and crafts, and book, categories both increased 40% in the state between June and July 2020.3

Booktopia’s Deputy CEO and CTO Wayne Baskin says the online bookseller has been operating at “what we call Christmas-peak demand since October 2019.” His teams are sending out their maximum volumes – over 30,000 units a day – from Booktopia’s distribution centre in Sydney.

At the same time, his team has had to adjust to social distancing requirements. “We’ve had to change the way we work in our distribution centre, having fewer people and keeping them further apart. Even separating shifts – end one early and start the next later – because we don’t want staff co-mingling. That makes it much harder to run over time.”

Three years ago, Booktopia had the foresight to invest in an automation project for their distribution centre which is now online. This has doubled their fulfilment capacity to more than 60,000 units a day.4

The project includes automated sortation, additional conveyor lines, new packing machines – and an additional 3,000sqm of adjacent facilities. All of which will reduce the pressure of managing surging volumes and restricted working conditions during the peak holiday shopping period.5

The four pillars of resilience

This investment in efficiency should also provide more control over the fulfilment portion of Booktopia’s supply chain process – one of the four core pillars of the resilient supply chain framework.1

In an increasingly complex, dynamic and interconnected world, supply chain risks go beyond internal operations or functional issues to encompass the macro environment (such as geopolitical tensions or natural disasters) and extended supply chain variables. For example, being dependent on a single supplier can have ‘shock wave’ consequences if their market access is restricted.1

To effectively manage these vulnerabilities, Deloitte recommends addressing critical capabilities across four key areas.1

1. Visibility

Having access to real-time information and lead indicators is crucial, on both the demand and supply side of the chain. This allows you to spot emerging trends and address any issues before they become business-critical.

2. Flexibility

It’s one thing to be able to pivot quickly to new opportunities, and quite another to have the flexibility to do so without blowing out costs and creating an unsustainable response. Flexibility means also being able to mitigate the impact of a critical disruption – being prepared with plans for different scenarios.2

3. Collaboration

Building trusted and effective relationships with your supply chain partners – including suppliers, distributors and logistics service providers – can help you solve problems more efficiently. Drawing on their expertise and broader perspective, you may be able to reconfigure or flex your operational capacity – or even improve service and response times.

4. Control

Having robust monitoring systems, policies and processes in place ensures you can effectively manage the end-to-end process.

Ready to respond

Baskin says managing supply chain risk comes down to good planning. “Making sure you’ve always got a fallback, in case an unexpected scenario happens – especially an event you don’t want to happen!”

He says his team’s biggest learning this year, from a supply chain perspective, has been how efficient their operating rhythm has become through the volume surge.

“We’re not having such major peaks and troughs now, and this lets us sustain our resources at a good level – and operate more efficiently.”

From a collaboration perspective, Baskin points to Booktopia’s strong partnership with Australia Post. “It’s everything from logistics – delivering the books – through to using Australia Post data to better service our customers. It’s quite a transparent partnership.

We’re always open with each other, making sure we’re hitting our promises to each other.”

This gives him confidence Booktopia is well positioned to take advantage of any future acceleration in eCommerce. “We have the operational capacity to cope with it, and a great team to service our customers.” And the experience that comes with having a global pandemic put his supply chains to the ultimate test.

To learn more, read the white paper, Supply Chain Resilience: Building confidence through a risk intelligent approach to supply chain management.

This article is provided for general information purposes only and is not intended to be advice specific to your business needs.

1 Supply Chain Resilience, Building confidence through a risk intelligent approach to supply chain management, Deloitte Touche Tohmatsu and Australia Post, September 2020

2 Deloitte’s advice for forecasting sales in uncertain times, Australia Post September 2020

3 Inside Australian Online Shopping, August 2020 update, Australia Post

4 Booktopia nears finish line on DC automation project, IT News, June 2020

Australia Post webinar September 2020: How to prepare for the next surge in online shopping