Supply chains in the 21st century are faced with a wide range of complex issues. There has been an increase in risk levels, with data from supply chain intelligence provider Resilinc showing a 118% increase in disruptive supply chain events from 2014 to 2015. Meanwhile, companies are also having to meet the needs of evermore demanding consumers, with 24 hour delivery now expected.
In order to meet these challenges, supply chains must be faster and more responsive if they are to retain a competitive edge. However, many organizations’ supply chain technologies and processes are simply not capable of supporting the necessary level of risk and response management to operate in this world, and the gap between what the supply chain provides and the requirements of the enterprise is only widening. Even companies traditionally held up as shining examples of best practise like Dell and McDonald’s are having to radically update their supply chain processes to remain viable. It is no longer enough to be efficient, they need to innovate too, integrating disruptive technologies such as IoT and AI to avoid being left behind.
In order to achieve this, companies are beginning to embrace the concept of ‘bimodal supply chains’. The idea of bimodal supply chain has been pushed heavily by Gartner in particular as a solution that meets the needs of supply chains in today’s world. David Willis, chief of research at Gartner, summarized the reasoning behind the theory, noting: ‘For decades, supply chain professionals have been rewarded for focusing on being operationally excellent, risk-averse and trained through continuous improvement techniques. However, that approach is evolving to include strategic thinking, change leadership and sophisticated finance and communications skills. It is crucial to be open to leveraging the wisdom of crowds and looking outside the company — and even outside the industry — for new ideas, and to bring those lessons back in practical ways. Learning how to explore through new means will drive bimodal adoption.’
The bimodal supply chain is divided into two separate, coherent modes - one focused on stability, the other on agility. Mode one is essentially traditional supply chain management, looking for low-risk, incremental improvement of the supply chain. It focuses on ensuring day-to-day operations can be relied upon to run as expected, while also looking for increased efficiency and cost-saving measures. This was enough in linear supply chains, with predictable demand fluctuation meaning production was relatively easy to manage and more localized suppliers meaning that short falls could be covered quickly. The business environment of today is too dynamic, too global, and too volatile, for this to be viable any longer. It may be essential, but more is needed.
Mode two is all about innovation, driving big changes that can help break into new markets and launch cutting-edge solutions. Mode two is focused on taking risks and moving quickly, running experiments to see how supply chains adapt to new risks and opportunities. In today’s world of rapid technological evolution, the ability to adapt quickly to change is as vital, if not more so, than the stability that comes from excelling in mode one. In order to facilitate this agility, mode two must build in controls to act as buffers in inventory management and capacity that allow the business to survive sudden shifts in the market - currency fluctuations, geopolitical changes, and so forth. In bimodal supply chains, once something has been tried in the mode two approach, it must be adapted to operate reliably at scale and introduced into mode one.
Such a strategy delivers a profitable yet consistent service across the business while adapting quickly enough to the changes of the fast moving world of today. But it needs a number of things in place to work. While mode one needs employees with traditional skills, mode two will look more at those with analytical capabilities such as data scientists - people capable of experimenting with new products and making precise predictions. It is also about creating a culture that not only encourages open thinking but balances its encouragement with ensuring those responsible for mode one do not feel sidelined. Many companies will experience a degree of conflict as the two compete for influence, resources, and power, and neither party must feel like they are losing out. If they work together and mode twos innovations can be introduced smoothly into mode one, it could become the only way of operating supply chains in the modern world.