Chief supply chain officers (CSCOs) must proactively embrace a geopolitically elastic supply chain strategy to support their organisations’ growth objectives, according to Gartner.
An elastic supply chain capability – which can expand or contract supply in response to geopolitical risks – provides supply chain organisations with greater flexibility and efficacy than operating from a single geopolitical bloc.
“The natural response to recent geopolitical tensions has been to operate within ‘trust boundaries’ which are geographical areas deemed comfortable for business operations,” says Pierfrancesco Manenti, vice-president analyst in Gartner’s Supply Chain practice. “However, there is a risk that these strategies are taken too far as maintaining access to global markets and their growth opportunities cannot be fulfilled by operating within just one geopolitical bloc. Instead, CSCOs should embrace a more flexible approach that reflects the fluid nature of geopolitical risks and positions the supply chain for new opportunities to support growth.”
Gartner recommends that CSCOs consider a strategy that is flexible enough to pursue growth amid current and future geopolitical challenges rather than attempting to permanently shield their supply chains from these risks.
Elastic supply chains in action
Gartner has outlined three key categories of action that define an elastic supply chain capability:
1 – Understand trust boundaries and define operational limits – CSCOs of large organisations dependent on sourcing a variety of raw materials, working with global suppliers, and accessing growth opportunities in developing markets increasingly must work outside the established geopolitical “trust boundaries” where their organisation is most comfortable operating. As a result, it is crucial to determine the organisation’s operational limits that incorporate both risk and values-based criteria from stakeholders before qualifying new business opportunities. Such limits are designed to safeguard the organisation’s reputation and legal standing.
2 – Assess the elastic supply chain opportunity – Rather than retrenching, an elastic supply chain capability seeks opportunities to expand into new markets and identify new areas to build capacity. CSCOs must assess the implications of leveraging an elastic supply chain opportunity – including building a business case to clarifying the benefits of the operation.
3 – Use targeted, market-specific scenario planning – The changing nature and interconnectedness of geopolitical risks places a premium on effective scenario planning. A Gartner survey of 258 supply chain leaders in January 2024 showed that 88% of respondents expect a moderate to very high positive impact from scenario planning when faced with geopolitical risk. In conducting such planning, CSCOs must collaborate to identify the top risks facing their organisations and the markets they operate in. Crucially, they then must assess how these risks could evolve over time.
“Effective scenario planning must incorporate the changeable nature of geopolitical risks – with AI and advanced analytics playing increasingly important roles in analysing data from suppliers, governments and the media,” says Manenti. “The best supply chains anticipate – rather than merely react to – geopolitical shifts that present new opportunities or risks.”