Gartner for Supply Chain
14 Tactics to Counteract
Supply Instability
Proven supply chain management practices
to offset the impact of supply constraints.
Overview
Whether it’s runaway price inflation or severe material shortages, supply chains are being
battered by supply instability.
The widespread nature of today’s supply constraints limits the effectiveness of any individual
action to offset the impact of supply instability. Thus manufacturers are employing a range
of tactics whose effectiveness varies widely by industry, competitive dynamics and supply
chain characteristics.
This white paper explores a collection of tactics that Gartner analysts have observed being
employed to help dampen the effects of supply instability. The list is not definitive, nor do
these tactics “solve” for supply instability. Rather, chief supply chain officers (CSCOs) and
chief procurement officers (CPOs) can use this analysis to stimulate idea generation
around tactics that could be employed for their unique organizational context.
Each tactic aligns to one of four fundamental strategies:
Shaping Shaping the Securing Optimizing
orders portfolio lower tiers allocations
2 © 2021 Gartner, Inc. and/or its affiliates. All rights reserved. CM_GBS_1543562
Tactics to
Shape Orders
Use commercial levers and transparent order management policies to shape demand
around periods of acute shortage.
For example:
Incentivize on availability. Work with your commercial teams to ensure they use
incentives (discounts, terms, lead time) to shape demand toward available options
or products.
Increase the transparency of allocation rules. Develop and clearly communicate
allocation rules that are not dependent on current order backlogs — for example,
using historical volumes. A common tendency in periods of extending lead times is
for partners to panic-buy. Establish allocation limits (within transparent rules) that are
not based on current orders, to minimize the impact of panic buys.
Adjust customer prices. Though pricing actions are rarely the first choice of CSCOs
and CPOs in combating supply constraints, they may be necessary where exposure
to severe constraints is high.
Tactics to Shape
the Portfolio
Adapt the product portfolio to drive customers toward products or configurations that can
be delivered within market-competitive lead times.
For example:
Rationalize the portfolio. Limit configuration options to the critical platforms where
volumes are material.
Use alternative materials. Work with the quality organization to determine the
alternative materials or components with comparable fit, form and function that can
be used temporarily.
3 © 2021 Gartner, Inc. and/or its affiliates. All rights reserved. CM_GBS_1543562
Tactics to Secure
Lower Tiers
Modify commodity management strategies to maintain continuous supply in the near term,
while avoiding overreacting and prolonging the impact when supply markets recover.
For example:
Consolidate supplier subtiers. Negotiate volume directly with your supplier
subtiers to increase purchasing leverage.
Consolidate across business units. Prioritize supply to the product lines with the
greatest impact.
Prebuy components with longest lead times. Partner with your suppliers to identify
components with extended lead times or high supply uncertainty. Develop shared
inventory-hedging strategies to reduce the risk in future supply. Execute prebuys for
these components to secure supply, reduce lead time and remove the risk.
Make future purchase commitments. Place advance purchase orders or adjust
agreements to reduce liability for suppliers in cases where the financial impact of
unfulfilled demand outweighs the financial impact of excess inventory.
4 © 2021 Gartner, Inc. and/or its affiliates. All rights reserved. CM_GBS_1543562
Tactics to Optimize
Allocations
Collaborate with suppliers to ensure optimal allocations of constrained resources.
For example:
Use formula-based pricing. Assess the viability of formula-based pricing tied
to public market indexes before agreeing to supplier price increases. Doing so
simplifies the process of negotiating price reduction when the market stabilizes.
Incentivize suppliers. Consider implementing a supply chain finance program such
as reverse factoring or dynamic discounting to offer suppliers faster payment.
Ask suppliers for component or material alternatives. Identify cases where
suppliers are using similar materials or components with other customers.
Combined with the use of alternative materials, this tactic can effectively increase
supply availability.
Expedite the use of alternate production lines or facilities. Identify other
production lines or locations where your materials could be manufactured, to
increase capacity in the short term.
Streamline supplier onboarding. Work with quality and engineering teams to
considerably shorten or optimize the supplier onboarding process so that alternative
suppliers can be onboarded faster and relieve demand shortages.
5 © 2021 Gartner, Inc. and/or its affiliates. All rights reserved. CM_GBS_1543562
Actionable, objective insight
Position your supply chain organization for success. Explore these
additional complimentary resources and tools on building an agile
supply chain:
Research On-Demand Webinar
Supply Chain Resilience in an Supply Chain Strategies to
Age of Disruption Build Resilient Supply Networks
Reset strategies to anticipate disruption Balance efficiency with flexibility,
as the “new normal.” agility and resilience in supply chain
network design.
Download Research Watch Now
Tool Infographic
Supply Chain Scenario How CSCOs Can Stay Agile
Planning in the Turns
Follow four steps to run a successful Make strategic plans and prepare your
supply chain scenario-planning exercise. team to accelerate out of each turn.
Access Tool View Infographic
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© 2021 Gartner, Inc. and/or its affiliates. All rights reserved. CM_GBS_1543562
© 2021 Gartner, Inc. and/or its affiliates. All rights reserved. CM_GBS_1543562
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