BCG: Operational Resilience the “New Necessity” to Deal With Disruptive Business Environment

No longer a one-off event, disruption has become woven into the fabric of our daily lives over the past several years. Between pandemics, wars, a looming recession, and severe weather events, it seems clear that extreme volatility has become the norm for our world. In spite of this new reality, a study by Boston Consulting Group (BCG) found that of 150 companies surveyed, only 10% had developed a full range of resilience capabilities crucial to future success, with the remaining 90% reacting to crises as they occur.

In an effort to help companies better face the challenges of uncertain times ahead, BCG has shared an operations resilience framework focused on structuring operations for resiliency, reacting quickly to disruptions, and building “enablers” to speed both efforts. The firm recommends that companies begin by establishing full visibility across the supply chain, analyzing data to assess risks, and building metrics to identify potential points of failure along the value chain.

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Organizations can use this information to help quantify potential disruptions and their durations, and can run scenarios to help gauge the impacts of different kinds of disruptions.

Companies that have built a resilient supply chain are able to move more quickly to restore disrupted operations to business as usual, potentially gaining a first-mover advantage in securing materials or capacity. BCG’s components of a rapid response include monitoring and sensing external events that may impact operations, utilizing predictive modeling to quantify the impact of supply chain disruptions, and developing a playbook, processes, and planning tools backed by real-time data to optimize decision making in times of crisis.

Structuring operations for resiliency serves as another third of BCG’s model. Supply chain networks can be designed to be shorter, more redundant, and with fewer single points of failure, balancing against cost considerations. Having a solid strategy behind sourcing can help drive decisions for buffering and redundancy, ensuring critical materials are available from two or more sources to ensure capacity.

Resilient companies also plan with volatility in mind by balancing cost, risk, and working capital in their inventory management, integrating resilience considerations into both short-term sales and operations as well as long-term planning. Building flexibility into product design specifications and reducing custom parts will also help businesses weather disruption by maximizing their options when materials become scarce.

Lastly, building “enablers” into the company’s resilience strategy will help break down silos, foster cross-functional collaboration, and boost fast decision making as part of everyday company culture, providing a crucial foundation for the rest of the framework.

To join the 10% of elite companies that are ready to thrive in times of crisis and uncertainty, businesses will need to build all the capabilities needed to implement an operations resilience framework. While doing so will require time and money, companies that are reasonably proficient will be better prepared for the next string of once-in-a-lifetime events.