Benchmarking Resilience: The KPIs of Disruption

This is an age of uncertainty. The rise of cyber-attacks and terrorism, the prevalence of extreme weather and natural disasters, and an increase in geopolitical tensions have put all businesses at risk. But companies juggling vast and complex global supply chains feel these risks most keenly.

When even a small disruption can have a massive impact, it’s vital that companies understand the resilience of their supply chain. By preemptively gauging how long it will take the supply chain to recover after a major disruption, supply chain managers are able to adopt a faster, and more strategic response should the worst happen. A wait-and-see attitude just won’t cut it—and could be the final nail in a company’s coffin if disaster strikes.

Recognizing risk

Aggressive competition is what drives companies to become best in class, encouraging leaner, more profitable operations. But this drive can be a double-edged sword, opening companies up to higher levels of risk.

Take consolidated or exclusive contracts with just a handful of suppliers. This can bring prices down, but if a single supply line is disrupted, it can result in all operations grinding to a screeching halt. The same is true of light inventory. While it can cut warehousing costs, it may also make companies significantly less agile in the event of an emergency.

Planning for the worst is only possible if supply chain managers first recognize their risk areas. Complacency breeds ill-preparedness. No one can predict when a major disruption like a hurricane or factory strike will occur, but a good manager will have a back-up plan ready just in case.

Measuring resilience

In response to rising uncertainty, smart companies are now measuring their supply chain’s resiliency as fervently as they assess efficiency and cost.

The increasing digitization of supply chain management has made it easier to gather and analyze the data needed to benchmark resilience. But which key performance indicators (KPIs) should a company turn to?

Upside supply chain flexibility is one KPI that can provide some insight into the resilience of the supply chain. To measure this, companies need to assess how long it would take their supply chain to achieve a sustainable production increase (like a 20% rise in demand) without it negatively impacting costs or service. The goal is to test a company’s agility following an unplanned event, making it a useful measurement for gauging the supply chain’s responsiveness to change.

Beyond agility-based measurements, some organizations are introducing new KPIs designed specifically to determine resiliency. These include time to recovery (TTR) and time to survive (TTS).

Specifically, TTR indicates how long it takes a facility or node to recover following a disruption. TTS, on the other hand, measures how long a company can continue matching demand if a given facility experiences a disruption.

If TTS is shorter than TTR, then companies will face a serious problem in the event of a disruption, since it will take them longer to recover than they can realistically handle with their current inventory. But while the TTS should always be longer than TTR, it does not need to be significantly longer. This may indicate an inventory overage, making these metrics doubly useful. They not only shine a light on resiliency but can help companies identify potential areas for improvement.

A resilient and reliable partner, no matter what

Whichever KPIs a company uses to measure the resiliency of its supply chain, it is important for supply chain managers to stay alert and be aware of potential challenges that might arise. And since this proactive approach will often help managers spot opportunities to improve their supply chain, it can provide a real strategic advantage as well as a back-up plan.

This is the approach we believe in at CTSI-Global. We’ve stood strong for over 60 years, successfully weathering storms that have left our competitors in the dust, so we know a thing or two about resilience. We aim to help the companies that partner with us bolster the resilience of their supply chains and prepare for anything. Our leading Business Intelligence solutions make it easy to analyze large data sets and glean actionable insights that drive meaningful change.

Don’t get blindsided by disruption. Partner with us today.

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