Living in a VUCA World

I was introduced to the term VUCA by my first business coach, Kathryn Welds, when we were discussing trying to navigate an unstable situation. In Supply Chain we love an acronym but this one had me stumped, perhaps not surprisingly as it originates from the US Military. Volatile, Uncertain, Complex and Ambiguous.

I can’t think of a better acronym to describe Supply Chain in 2024, and now with an election looming and the possibility of a radical shake-up of tariffs on one side or significant ‘green tax’ policy on the other, we are absolutely entering, if not already in, a VUCA world. The concept is relevant to every organization, especially with the post-covid (and very necessary) focus on Continuity Planning, it underscores the need for agility, resilience, and innovation - especially in managing global supply chains.

Diving into a bit more detail:

Volatility: Refers to the speed and magnitude of change within an industry or market. Covid feels like the obvious example, but right now we also see volatility externally in areas such as labor action and extreme weather events, while internally it might be things like staff turnover, sudden changes in demand or even network availability. Disruptions and delays are where the majority of the volatility is seen, especially as we move closer to a same/next-day ship model as standard across ecomm.

Uncertainty: This involves the lack of predictability about future events. For me, volatility often describes an event, the uncertainty comes in either the magnitude or length of the disruption. This might cover supply shortages or, a very relevant current example, regulatory changes.

Complexity: It’s a fallacy that there was a time when Supply Chains weren’t complex, however the level of that complexity has undoubtedly increased at an exponential rate in line with the usage and scope of technology. Complex supply chains involve many interconnected parts and not just from a tech perspective, such as multiple suppliers, 3/4/5PL’s, and different regulatory environments. It is thrilling to see how much more data is available, even in the past five years, however it has added enormous complexity to folks working within Supply Chain.

Ambiguity: A common mistake is to conflate uncertainty, which refers to unknowns about something, with ambiguity, which is about multiple interpretations of something. Ambiguity for Supply Chains can refer to situations where cause-and-effect relationships are hard to predict and can arise from factors such as new industry standards, evolving technologies or changing consumer behaviors. As with complexity, the data overload is a real challenge and having the data is the first part, knowing how to use it to avoid ambiguous outcomes is critical.

As Dug (left) is clearly thinking here, ‘fine, I accept it’s a VUCA world, what can I do about it?’

Dug’s volatility may be small children, uncertainty of who will provide the treats, the complexity of squirrels running up trees out of reach and the ambiguity of what will happen when barking when someone approaches the house, but for Supply Chain there are clear strategies to maximize effectiveness in a VUCA environment.

I do understand that I’m really stretching the analogy but a) finding pictures that represent a VUCA world is fairly tedious, and, b) it gave me a great excuse to put the world’s most handsome dog in an article (no citation needed). Also quite a handy way to work out if anyone actually reads these…

VUCA is merely a framework on what is already there - we have always been in a VUCA world, the skill comes in the ability to analyze and interpret it.

To navigate this landscape, an organization cannot be rigid, there has to be the flexibility to change and the agility to execute that change - this can included diversifying the supplier base (both geographically and in number), thorough continuity planning for internal teams or even reassessing if models such as JIT offset risk with suitable savings. Investing in technology and automation is a path that every Supply Chain should on, however emphasis must be placed on ensuring the ‘why’ of the route being taken - if the desired outcome isn’t clear it will lead to data overload and a lot more complexity and ambiguity.

Technology is important and flexibility is critical, however for both of these elements to be successful in mitigating for a VUCA environment, communication needs to be the ultimate priority. Internally, there needs to be transparent and clear communication up and down the Supply Chain (and beyond) to ensure that the ability to interpret data and events isn’t impeded. Externally, integrating with suppliers as much as possible will yield the best communication and therefore help mitigate against increased volatility. Finally, externally there is customer communication - I am evangelical about Supply Chains being customer-centric and 99% of customer frustration arises from a lack of visibility, whether it's shipping milestones, out of stock items or the ability to problem-solve when things do go wrong.

In a VUCA world, it highlights that Supply Chain Management is far more than simply managing the flow of goods. It recognize a fact that has always been true, SCM is a strategic function that requires companies to be agile, resilient, and innovative in the face of uncertainty and complexity. There is no cheat-sheet as every situation is unique, however one can hone the skills required to be able to mitigate risk and manage it when it occurs - this requires a mindset of continuous improvement and adaptability and thus give Supply Chains and organizations a fighting chance in surviving in a volatile and uncertain world that is growing ever more complex. Oh, and ambiguous.