Supply chain opportunity in an uncertain economic recovery

Abstract

PurposeThe purpose of this article is to discuss opportunities that businesses have to grow their operations in a more scalable way with a higher level of investment in variable‐cost resources and assets. For most companies around the world, resources have been reduced, inventory drained, technology spending curtailed, and core processes scaled back in order to adjust to the current reality of reduced demand. In an uncertain recovery, supply chain operations need to be more scalable and flexible as they anticipate economic recovery and increase capacity. Moreover, this can be easier to achieve coming out of a severe recession.Design/methodology/approachThis work first explains why scalability and flexibility benefits are potentially easier to achieve when rebuilding supply chain operations out of a severe downturn. Second, a rationale is provided to show how a scalable and flexible supply chain mitigates multiple risks from economic uncertainty during a recovery where a more traditional fixed‐cost approach does not. Third, a four‐step approach is described that businesses can follow to identify and capture supply chain opportunities where a scalable and flexible model might be most sensible to consider.FindingsMore scalable, variable cost supply chain operations have clear advantages over more traditional cost ones, especially when the economic recovery includes a high level of uncertainty and there is a risk of reentering a renewed recessionary period. There may be no better time than now for enterprises in any industry to consider adopting a more variable cost supply chain to limit risk and capture the most revenue growth opportunity.Originality/valueThe concepts of centralization, utilizing temporary and part‐time labor, and outsourcing are certainly not new ones and many companies have already benefited from adopting these ideas in their supply chains. However, it has not been widely recognized that these same concepts pose heightened and renewed opportunity for any business across industries because of how the global recession has changed their business landscape. Since companies have already downsized labor forces, drained inventory levels, closed facilities, and cut other costs dramatically, there is a tremendous opportunity to evaluate new, more variable‐cost business models as they grow operations to meet renewed demand.