Article

The term "polycrisis" is becoming increasingly relevant in today's global landscape, although the term itself is not yet widely recognized. More so than other businesses, those in logistics and supply chain management are working through a convergence of multiple global crises that, combined, create compounded disruptions exceeding the impact of individual events.

Lingering pandemic-induced production shutdowns and ballooning freight rates to geopolitical conflicts in the Red Sea and widespread labor unrest, supply chains worldwide have been under unprecedented strain. Until recently, businesses have had the luxury of being reactive. In this environment, however, businesses must shift from a purely responsive stance to a strategic approach that embraces resilience, proactive forecasting, and innovative solutions.

Eliminating disruptions is an impossible task, but when navigating a polycrisis, the objective should be to minimize the impact of inevitable hiccups and ensure a stronger position in the post-crisis period. To be successful, the mindset must shift from traditional risk management to dynamic scenario planning.

Key elements of this approach include:

• Enhanced Forecasting Capabilities: As seen during the early days of the pandemic, conventional forecasting models often fail under extreme circumstances. Companies that relied on historical data found their predictive systems incapable of addressing unique disruptions.
• Risk Buffers and Safety Stock Management: Maintaining flexible supply chain buffers is crucial for mitigating the impact of unpredictable events.
• Leveraging Digital Twins and AI-Powered Analytics: Employing advanced digital monitoring techniques such as Digital Twins, simulate real-world supply chain scenarios and provide granular insights into potential disruptions enabling more effective contingency planning.

Waiting until a crisis occurs typically means higher costs, missed opportunities, and operational failures. Any finance professional knows that options have value, and in the logistics world, this can be readily apparent when reliable supply chains and distribution channels start to fail. Companies that can leverage scenario analysis into their supply chain strategies can proactively develop contingency plans, ensuring greater agility when responding to unexpected disruptions.

When a crisis hits, companies often respond by tightening their grip on every part of the supply chain, worried that losing control will exacerbate disruptions. But sometimes, this knee-jerk reaction creates new problems instead of solving them.

According to Prof. Dr. Andreas Bauer, Adjunct Professor in Supply Chain, Operations, and Logistics at Broward College, "It is better to make changes in an incremental, fact-based, and realistic way rather than simply responding for the sake of responding. To be honest, Just in Time, Zero Inventory, Kanban, and Lean Production might all be dated methods, but in a polycrisis world, these are still helpful tools for every business function to adapt to a world in which supply chain risk and inventory have taken on increased importance."

In this post-pandemic world, polycrises are not the exception; they have become a defining feature of the business landscape. Agility is key. The companies that stay ahead are the ones that can see what’s coming and adapt quickly. Instead of reacting to crises, businesses that take a proactive approach can turn uncertainty into opportunity—gaining an edge and building long-term resilience in an unpredictable world.

Klimas, T.