In the face of more frequent disruptions – from natural disasters to pandemic – supply chain professionals are shifting their focus to mitigating risks and assessing resilience.
After the pandemic, 93% of CEOs who responded to a McKinsey survey said they expect to increase resilience by rebalancing their supply chains, up from 70% before the pandemic.
Supply chain resilience stress testing is a key first step in assessing risk. The report advises, because risks are always changing, get the test done on a frequent basis. The stress test measures resilience across the following factors (see graph):
- industry attractiveness. How successful is your industry in generating economic profit and cash transfer performance compared to other sectors?
- Company flexibility. How well does your company perform on earnings and cash conversion cycle compared to similar companies?
- global supply chain. What parts of the supply chain, including suppliers, can be at high risk when a major disruption occurs?
- operations. What internal processes and labor pool could be severely affected in the face of major disruption?
- Client. What clients may be at high risk when a major disruption occurs?