Increasing Supply Chain Resilience in Portfolio Companies

Supply chain is back on the agenda! 

Supply disruption has not been far from the headlines over the last few years. The impacts of geo-politics, post-pandemic pent-up demand and inflationary economic shocks have exposed the fragility of global supply chains. 

Volatility, uncertainty, complexity and ambiguity are now a daily reality. Supply chain risks need to be understood and managed. Procurement needs to become agile and step up to the supply chain challenge.

The impact for PE firms has been significant. Supply disruption in their portfolio companies has diverted focus, damaged customer perception, exposed risk and weakness, and eroded margins.

For portfolio companies, stabilizing supply chains and then improving supply resilience requires focus in four areas:

1. Value Chain: including n-tier supply chain transparency and management, resourcing and multiple source strategies, developing production depth and footprint, localization and supplier relationship management
    
2. Product/Technical: including standardization to reduce complexity, dual design, cost/value engineering, modularization and variation management as well as accelerated qualification
    
3. End-to-end planning: including inventory/safety stocking, S&OP and forecasting, logistics network redesign, and supplier risk/incident management 
    
4. Financing: including hedging, supply chain financing, CAPEX ownership and capacity buying

For PE owners, consideration should also be given to longer-term investment in systems and supporting portfolio companies with big-data analytics; areas where cross-portfolio expertise can make a significant impact.