The Cost of Chaos: Why Reactive Problem Solving is Crippling Efficiency
Supply chain disruptions are an all-too-familiar phenomenon for modern businesses. Amid rising risks and awareness, many organizations have embraced disaster response planning, but unexpected scenarios are still both common and damaging. Much of the issue stems from being on the wrong side of proactive versus reactive problem solving.
Proactive vs. Reactive Problem Solving
Too many companies fall into the complacency trap of reactive problem solving. Between 2020 and 2022, investments in long-term supply chain resilience grew by 7% per year, but such action declined to 2% annually from then until now. That represents a massive risk when it takes an average of two weeks to plan and implement a response to any disruption.
Responding to emergencies once they arise requires less upfront investment and can lower the overall impact. However, it still results in considerable losses, especially considering how a business might have been able to avoid the situation entirely had it gone down another path.
Proactive problem solving, by contrast, seeks to prevent disruptions instead of improving responses after the fact. The best strategies still involve some disaster planning, as predicting everything is impossible, but even unforeseen situations are easier to handle when staving off more dramatic effects. When organizations experience between one and 10 disruptions in a single year, any improvement can yield substantial results.
How to Embrace Proactive Problem Solving
The need for proactive over reactive problem solving is clear, but how to implement it is often less evident. Specific steps may vary between supply chains, but a few best practices apply in all scenarios.
Use a Management Operating System
One of the most foundational steps is to build a management operating system (MOS). An MOS provides an organized structure of the company’s strategic goals and how smaller targets, actions and performance metrics fit within them. Supply chain leaders should use this reference to recognize where disruptions may arise and which situations would be most damaging to their highest priorities.
A detailed MOS will also enable better adaptability in disaster planning, as it reveals what the business can and cannot sacrifice. Ensuring everyone refers to the same MOS during decision-making is also crucial. Miscommunication alone is a significant disruptor, costing U.S. organizations $1.2 trillion annually, so this alignment goes a long way.
Design With Resilience in Mind
Proactive problem solving should also reach as far back as product design, developing items to use materials and production methods that leave less room for disruption. Designs fit for silicone injection molding instead of machining are a good example, as injection molding virtually eliminates material waste and is highly automatable. Hence, resource constraints or labor challenges are less disruptive.
Efficient manufacturing methods are just part of the resilient design equation. Material type, scarcity and supplies are also impactful, and broader supply chain-level changes can yield significant results. Some companies have lowered costs by roughly 80% by changing one supplier, leaving them more able to absorb disruption.
Implement Proactive Maintenance Strategies
Manufacturers and logistics fleets can embrace proactive problem solving by implementing preventive maintenance. Equipment malfunctions may not seem as worrying as larger supply chain disruptions, but automakers lose $2.3 million for every unproductive hour, and such costs have quadrupled in the past five years.
Businesses must move away from reactive, run-to-failure practices. Regular scheduled maintenance offers marginal improvements, but even this involves significant waste. The best solutions are condition-based repairs and predictive maintenance, both of which rely on technology to only perform care as needed, minimizing both planned and unplanned downtime.
Maximize Supply Chain Visibility
Visibility is another key differentiator between reactive versus proactive problem solving. The only way to get ahead of issues before they arise is to understand their likely sources, which requires transparency across the supply chain. Most operations also have room to improve here, as only 13% of global businesses fully understand their sourcing networks.
Manufacturers must collaborate with their upstream suppliers to create a more detailed list of all involved parties. Full visibility typically requires technologies like blockchain or Internet of Things (IoT) tracking, as these can provide more in-depth records of all transactions and, in some cases, enable real-time updates.
Find Opportunities to Lower Risk With AI
Once leaders have established transparency across the supply chain, they can connect IoT systems and other data to artificial intelligence (AI) to find de-risking opportunities. Some areas to improve may be immediately evident, but AI outperforms humans when finding trends in vast datasets. As such, it is an indispensable tool for comprehensive proactive problem solving.
AI-driven risk management is relatively new but has already produced meaningful results. The Defense Logistics Agency has used it to identify counterfeit suppliers and other instances of noncompliance. Following suit can help private companies find and resolve potential hazards before they lead to disruption.
It Is Time to Move Beyond Reactive Problem Solving
Modern supply chains are too complex and the costs of volatility are too high to justify reactive problem solving. Moving to a more proactive approach may involve upfront expenses and complications, but it will produce savings and greater efficiency in the long term.
Only by anticipating and responding to risks before they cause issues can organizations ensure ongoing productivity.
*This article is written by Lou Farrell. Lou is a Senior Editor at Revolutionized and has covered topics in the fields of Manufacturing, Supply Chains, and Technology, cultivating a deep understanding and passion for these areas. Together with his love of writing, Lou enjoys being able to share his knowledge with others.
