Building for Resilience - Ukraine, Sanctions, and Supply Chains

The events of the past week have been, to say the least, unsettling. Russia’s invasion of Ukraine has sent shockwaves across the globe, impacting everything from geopolitics to the global economy. As a product leader, my thoughts are with the people of Ukraine, and also with the ripple effects these events are having on our interconnected world, especially the fragility of our global supply chains, a topic close to my heart.

In the tech world, we’ve become accustomed to a seamless flow of goods and services. We design products in California, source components from Asia, manufacture in multiple countries, and ship to customers worldwide. It’s a complex, intricate dance that, until recently, we largely took for granted. Now, with geopolitical instability, sanctions, and escalating conflict, the music has stopped, and we’re all scrambling to find our footing. The fragility of this system has been laid bare.

The current crisis, layered on top of the existing pandemic-induced supply chain woes, is a stark reminder that resilience must be at the core of everything we build. It’s no longer enough to optimize for efficiency and cost alone. We need to build products and processes that can withstand shocks, adapt to change, and continue to deliver value even in the face of uncertainty.

The Wake-Up Call We Needed

For years, we’ve been operating under the assumption of a stable, interconnected world. This has led to highly optimized, just-in-time supply chains that are incredibly efficient in normal times but incredibly vulnerable in times of crisis.

• Over-reliance on single-source suppliers: Many companies have become overly dependent on single suppliers for critical components, often located in one geographic region. This creates a single point of failure that can bring an entire production line to a halt.
• Lack of transparency and traceability: Complex, multi-tiered supply chains often lack transparency, making it difficult to track the origin of components and identify potential risks.
• Ignoring geopolitical risks: We’ve often prioritized cost and efficiency over geopolitical considerations when making sourcing decisions, leaving us exposed to the whims of unstable regimes and international conflicts.

The current situation is a wake-up call. It’s forcing us to rethink our assumptions and re-evaluate our priorities. And while the short-term challenges are significant, I believe this is an opportunity to build a more robust, more resilient, and ultimately more sustainable future for product development.

Building Resilience: A Product Manager’s Playbook

So, how do we, as product leaders, navigate this new reality? How do we build products that can weather the storm? Here are a few strategies we should be considering:

1. Diversify Your Supply Chain

This is the most obvious, but also the most crucial step. We need to reduce our reliance on single-source suppliers and build more diversified, geographically distributed supply networks.

• Identify critical dependencies: Conduct a thorough assessment of your supply chain to identify critical components and potential bottlenecks. Map out your suppliers, their locations, and their dependencies.
• Develop alternative sources: Actively seek out and qualify alternative suppliers in different regions. This may involve higher upfront costs, but it’s a worthwhile investment in long-term resilience.
• Build strategic partnerships: Forge stronger relationships with key suppliers, fostering collaboration and transparency. Consider joint ventures or strategic investments to secure access to critical resources.

2. Embrace Localization (Where it Makes Sense)

While globalization has brought many benefits, the current crisis highlights the value of localization, particularly for essential goods and services.

• Explore regional manufacturing hubs: Consider shifting some production closer to your key markets. This can reduce lead times, transportation costs, and exposure to geopolitical risks.
• Invest in local talent and infrastructure: Support the development of local manufacturing capabilities and talent pools. This can create a more robust and self-sufficient ecosystem.
• Balance global and local: Localization doesn’t mean abandoning globalization altogether. It’s about finding the right balance between global efficiency and local resilience.

3. Design for Flexibility and Adaptability

We need to design products that are less sensitive to supply chain disruptions and more adaptable to changing circumstances.

• Modular design: Embrace modular architectures that allow for easy swapping of components and sub-assemblies. This can make it easier to adapt to component shortages or changes in supplier availability.
• Standardization: Use standardized components and interfaces whenever possible. This can increase the pool of potential suppliers and reduce the risk of being locked into a single source.
• Software-defined everything: Leverage software to control hardware functionality whenever possible. This can allow for greater flexibility in sourcing and manufacturing, and even enable remote updates and feature modifications in response to changing conditions.

4. Build in Redundancy and Safety Stock

While just-in-time inventory management has its merits, it’s time to rethink our approach to inventory and build in more buffers.

• Strategic safety stock: Maintain a strategic reserve of critical components to cushion against supply chain disruptions. The level of safety stock will depend on the criticality of the component, lead times, and the level of risk you’re willing to tolerate.
• Redundant systems: For mission-critical applications, consider designing in redundant systems that can take over in case of failure. This is particularly important for products used in healthcare, infrastructure, and other essential sectors.
• Dynamic inventory management: Implement systems that can dynamically adjust inventory levels based on real-time demand, supply chain conditions, and risk assessments.

5. Invest in Supply Chain Visibility and Risk Management

We need to have a much clearer picture of our supply chains and the risks they face.

• Real-time monitoring: Implement systems that provide real-time visibility into your supply chain, tracking the flow of goods, identifying potential disruptions, and alerting you to potential risks.
• Risk assessment and modeling: Develop models to assess the likelihood and impact of various risks, including geopolitical events, natural disasters, and pandemics. Use these models to inform your sourcing and inventory decisions.
• Scenario planning: Develop contingency plans for various scenarios, including supplier disruptions, transportation bottlenecks, and geopolitical crises. Regularly test and update these plans to ensure they remain relevant.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” - Charles Darwin

The Road Ahead: Collaboration and Innovation

The challenges we face are complex and multifaceted. They require not only technological solutions but also a fundamental shift in mindset. We need to move from a culture of optimization to a culture of resilience, from a focus on short-term gains to a focus on long-term sustainability.

This is not something any one company can achieve alone. It requires collaboration across industries, across sectors, and across borders. We need to work together to build more resilient supply chains, develop new technologies, and create a more stable and secure global economy.

I am confident that we, as product leaders, are up to the task. We are, after all, innovators, problem-solvers, and builders of the future. Let’s use this crisis as an opportunity to learn, adapt, and build a better world – one that is not only more efficient and innovative but also more resilient, more sustainable, and more equitable for all.

Let’s use this moment to build products that are not just smart but also strong, not just innovative but also reliable, not just profitable but also responsible. Let’s build a future we can all be proud of.

What steps are you taking to build resilience into your products and processes?

While I don’t have comments enabled on this blog yet, I’d love to hear your thoughts and ideas. Feel free to share with me.