In an era where volatility has become the norm, traditional supply chain models are being fundamentally re-evaluated. Few voices have shaped this evolving conversation as profoundly as Dr. John Gattorna—renowned author, global supply chain strategist, and architect of the Dynamic Alignment™ model. With a career dedicated to bridging theory and practice, Dr. Gattorna continues to influence how leading organisations design and operate their supply networks in an increasingly unpredictable world.
In this Executive Insight, Dr. Gattorna shares a forward-looking perspective on the critical themes reshaping the supply chain landscape—from embedding resilience and cultivating agility, to the rise of sovereign supply chains and the dual-structure organisation. As businesses prepare for the next wave of disruption, his message is clear: success depends not just on digitisation or cost control, but on dynamic structures, behavioural alignment, and courageous leadership.
Embedding Resilience: From Reactive to Embedded Capabilities. You’ve emphasised the importance of “embedded resilience” in supply chains. How does this concept differ from traditional risk management approaches, and what practical steps can organisations take to integrate resilience into their supply chain design and operations?
Traditional supply chain risk approaches tend to focus on the probability of a disruptive event (big or small) occurring in the external operating environment at some point in the future, with an emphasis on developing appropriate contingency plans to offset the expected negative impact of such events.
However, these days—given the vast array of potential events that can negatively impact enterprise supply chains—it has become almost impossible to anticipate and prepare for every eventuality ahead of time. This is especially true in the case of massive ‘black swan’ events such as pandemics, trade wars, terrorism, and cyberattacks, all of which are practically impossible to forecast accurately.
A more contemporary approach, adopted by the best global companies, is the one suggested by David Simchi-Levi. It involves building a computer model of the entire supply chain network—from supply-side through to demand-side—and testing various scenarios to calculate the ‘time-to-recover’ (TTR) or ‘resilience factor’ due to a particular type of disruption, along with the corresponding ‘cost-to-recover’ (CTR). This enables companies to identify the most vulnerable parts of their network and proactively develop targeted buffer strategies ahead of time to reduce potential impact.
These buffer strategies can include a combination of the following initiatives:
Supply-side: dual or multiple sourcing; regional (geographical) diversification; insourcing critical components; encouraging redundant capacity in key suppliers; and placing inventory buffers at critical points along the inbound supply network.
Manufacturing: embedding redundant capacity (machinery and labour); developing long-term alliances with external partners for outsourcing during shortages; embedding flexibility in batch sizes through initiatives such as ‘group manufacturing’; and adopting postponement techniques at the dispatch point to customers.
Logistics: securing space with contract logistics providers in advance based on expected capacity requirements rather than specific orders; and encouraging logistics partners to build in their own buffer capacity to cope with extreme fluctuations in supply and demand.
Channel partners: sharing inventory positioning data up and down the channel through collaborative data sharing.
Paradoxically, in times of major disruption, the very complexity of some supply chain networks brings with it a degree of embedded resilience.
But perhaps the greatest risk-reduction mechanism in the face of externally generated disruptions is end-to-end digitisation across supply chain networks. This enables near real-time visibility of what is actually happening across the network, and allows enterprises with advanced digital capabilities to make faster decisions than competitors. This speed of response is, in itself, a major factor in embedding resilience in modern supply chains—but unfortunately, few global enterprises currently have this capability in place.
Finally, much of what we’ve discussed so far assumes that risk is mostly externally generated. Increasingly, however, internal risk—specifically, leadership teams that are unable or unwilling to take full responsibility and make timely investment and operational decisions—is becoming a significant factor to manage and overcome. In particular, delaying investments in technology is certain to reduce an enterprise’s resilience in an increasingly volatile operating environment. This capability gap highlights the need for a new type of leadership—leaders who can shape subcultures within their organisations that embrace risk and manage it head-on, rather than attempting to avoid it.
Dynamic Alignment in the Digital Era: Your “Dynamic Alignment” model underscores the need to align supply chains with customer behaviors. In today’s digital landscape, how can organisations leverage digitisation and analytics to achieve this alignment and enhance supply chain responsiveness?
The Dynamic Alignment™ model, developed and trademarked by Gattorna Alignment, is unique in that it provides an enduring methodology to guide enterprises in designing and operating their supply chain networks—under any operating conditions.
In brief, the model comprises four discrete but interconnected levels: Customer/Market, Operational Strategy, Internal Cultural Capability, and Leadership Style. Notably, the common factor in three of these four levels is human behaviour. The diagram below (if included) depicts the four levels as described.
Conceptually, the idea is to identify and group customers in the target market into a small number of dominant, manageable segments based on their preferred buying behaviours, each with unique expectations regarding how they wish to buy and be served. Once these groupings are established—usually four dominant types emerge, with the potential for a fifth in times of disruption—aligned operational strategies can be developed to minimise both under- and over-servicing.
To efficiently implement these operational strategies, a corresponding range of subcultures—each designed to support the servicing of a specific customer segment—must be shaped inside the organisation over time. This interface between operational strategies and internal subcultures is critical. Based on our empirical experience, 40–60% of intended strategies are never delivered, with the primary reason being misalignment between these two levels.
Then comes the all-important leadership style layer. Here, it is essential to build a leadership team with a broad span of leadership styles that can, both individually and collectively, shape the right subcultures within the organisation. These subcultures, in turn, drive the execution of aligned operational strategies tailored to the identified customer segments within the specific operating environment.
The reverse also holds true: once alignment is achieved on the demand-side, it creates the conditions to align with suppliers on the supply-side through appropriate procurement strategies. This approach goes far beyond traditional procurement, which typically focuses on product rationalisation and spend reduction—actions that may be completely misaligned with actual customer expectations.
While much of this business model depends on aligning human behaviours and decision-making throughout the supply chain, the speed at which these decisions can be made hinges on enterprises having in place end-to-end digitisation, supported by a range of technology applications. Any data gaps can be filled using sensors operating in an Internet of Things (IoT) environment.
In today’s world, this is best achieved by integrating legacy systems and new applications through a technology integration layer, which allows data to be extracted and used for a variety of purposes. This includes real-time data to power Control Towers that manage the receipt and delivery of individual customer orders, as well as the aggregation of the same data to populate network optimisation models. These models support strategic supply chain design with a planning horizon of up to five years before the next major review.
Reshoring and Regionalisation: Rethinking Global Supply Chains. The trend towards reshoring and developing regional supply chains has gained momentum. How do you view this shift in the context of supply chain resilience and agility, and what factors should companies consider when transitioning from global to regional supply chain models?
Globalisation of trade likely reached its peak just before the COVID-19 pandemic, around 2020. As a result of the widespread disruptions that followed, companies and governments were forced to completely rethink their supply-side procurement strategies. This re-evaluation focused on how supply chains could be made more resilient in the face of ongoing and unpredictable disruptions—both large and small. Since then, the demand for more resilient supply chains has only intensified, particularly with the uncertainty surrounding policies such as Trump’s blanket approach to tariffs for all US trade partners.
The problem with globalisation prior to 2020 was that procurement executives had increasingly pushed sourcing further across the globe in pursuit of ever lower production costs. While this may have delivered short-term savings, it had the dual effect of hollowing out local domestic production and making extended global supply chains brittle—so much so that they failed when disruptions inevitably occurred.
The response from the most forward-thinking enterprises—and indeed many governments—has been to adopt a hybrid solution. Production is now being distributed across global, regional, and local geographies in an effort to reduce risk and enhance resilience against future unplannable disruptions. In particular, governments have begun to identify and prioritise products deemed strategic to national interests and critical to manufacture domestically—what we call ‘sovereign’ supply chains.
In effect, both companies and governments are moving away from the previous relentless pursuit of the lowest-cost source, and are now seeking to embed more redundancy into the system. This includes establishing multiple sources of supply (some of which are self-owned) across different regions. It’s a direct reversal of the globalisation trend that had dominated procurement strategies up until 2020.
The early stages of reshoring are focused on critical products and materials—such as steel, vaccines, war munitions, and specific technologies—representing the core of these sovereign supply chains. Here, selected product categories are being brought back to domestic manufacture, not for cost reasons, but for strategic risk mitigation. However, expanding this list of reshored products will require detailed analysis, as such decisions depend largely on narrowing the cost gap between local production and overseas alternatives.
Regardless of intent, the task of reshoring will take years—if not decades—to achieve meaningful scale in economies that have, for the most part, abandoned manufacturing and lost the associated skills required to sustain it.
As with other aspects of supply chain redesign, the best companies are turning to network optimisation models to test different scenarios involving a blend of global, regional, and local manufacturing for their product range. These models help identify optimal strategies that balance production costs, logistics costs, sovereign risk, and the level of agility needed to serve target markets competitively.
Cultivating Agility and Flexibility in Supply Chains: Agility and flexibility are critical in today’s volatile supply chain environment. What organisational structures, leadership approaches, and cultural elements are essential to foster these qualities within supply chains?
Parts of this question have already been addressed earlier. However, for clarity, it’s important to state that achieving flexibility, agility, and low cost within a single supply chain is simply not feasible. In practical terms, companies need to configure up to five distinct supply chains—or pathways—through which products and services flow to their target markets.
To enable this multidimensional capability, the ideal organisational structure is a dual one. The vertical disciplines in this structure are the traditional functions we’re familiar with—Procurement, Logistics, Production, Finance, Sales and Marketing, and HR. However, as the world has accelerated over recent decades and customer expectations for shorter lead times have grown exponentially, these vertical functions have increasingly struggled. They can no longer simultaneously deliver specialised expertise and meet the variable, often urgent, demands of different customer segments.
What is now required is the addition of horizontal, multi-disciplinary teams. These teams are seconded from the core functions for periods of around two to four years and are selected specifically based on their mindsets and skill sets, ensuring they are matched to the buying behaviours of the customer segments they serve. Critically, the team’s internal subculture must align with the expectations of the segment in question.
For instance, a collaborative team subculture should be configured to serve collaborative or loyal customers. A transactional subculture suits customers prioritising low cost and high reliability. A campaign-style subculture is appropriate for customers focused on completing projects on time and on budget. A dynamic subculture matches customers demanding speed and agility in response. Finally, an entrepreneurial subculture best serves customers looking for fast, innovative solutions to major disruptions.
The vertical and horizontal components of this dual structure work in sync and are complementary. However, in this model, the horizontal flow to customers takes precedence over the internal objectives of the vertical functions. This marks a sharp departure from the traditional matrix structure, in which vertical functions tended to dominate, often to the detriment of customer responsiveness.They held the budget and therefore the power!
It’s also worth noting that customer needs are not static. As customers shift their dominant buying behaviour—often due to changing market or operating conditions—they must be serviced by the supply chain type aligned with that new behaviour. This underscores the need for a truly dynamic solution to customer service. The widely used one-size-fits-all approach has always been flawed, because customer behaviour evolves, and the supply chain must be flexible and agile enough to evolve with it.
Future-Proofing Supply Chains: Preparing for the Unknown. Looking ahead, what emerging trends or disruptions do you foresee impacting supply chains, and how can organisations proactively adapt their strategies to future-proof their supply chains against such uncertainties?
Looking ahead, we need to stop trying to forecast specific future disruptions—whether triggered by financial crises, supplier bankruptcies, geopolitical tensions, or climate-related shocks. The reality is that we now operate in a two-tier world of volatility. Tier 1 represents Business-as-Usual (BAU), where fluctuations of plus or minus 40 percent around a perceived ‘normal’ baseline are to be expected. Tier 2 reflects ‘Extreme’ or ‘Black Swan’ conditions, where volatility can swing by as much as plus or minus 100 percent. Both levels are critical to understand and are best visualised as part of a broader volatility framework.
For Tier 1 (BAU), organisations need a blend of offensive and defensive strategies, tailored to the specific stage of the market cycle. During downturn phases, the focus should be on minimising costs and working capital, while preserving the capability to grow once the market turns. In contrast, during upturns, companies should aim to maximise sales while simultaneously safeguarding their baseload customer demand amidst a surge of new opportunities. Striking this balance is key to long-term success.
Tier 2, on the other hand, demands a different mindset altogether. When facing extreme disruption, two distinct capabilities are essential: quick response on the day, and preparedness in advance.
Quick response hinges on fast decision-making, which in turn depends on end-to-end digitisation across the supply chain. This must be backed by a team of action-oriented individuals with a high-risk tolerance, working within a creative and focused subculture. Such teams also require access to real-time modelling capabilities, ready to run different scenarios as events unfold.
Preparedness, meanwhile, involves building a robust range of resilience strategies. These include establishing network buffers, maintaining headroom capacity, and embedding system-wide redundancy to absorb shocks. Visibility along the supply chain is crucial, as is forging close partnerships with key network members—especially suppliers. Organisations should invest in early-alert systems, ensure role clarity within management teams during crises, and, where possible, maintain a standing team that can immediately spring into action at the first sign of disruption.
Ultimately, future-proofing supply chains is less about predicting the next disruption and more about designing systems and cultures that can adapt, respond, and recover—regardless of what comes next.
