The Future is Coming

November 30th, 2012 1:20 pm Category: Distribution, Global Supply Chain, Network Design, Operations Research, Risk Management, Supply Chain Improvement, by: Jim Piermarini

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What kind of risks are you prepared for?

As a supply chain manager, you have profound control over the operations of your business. However, it is not without limits, and mother nature can quickly and capriciously halt even the smoothest operation. Or other man-made events can seemingly conspire to prevent goods from crossing borders, or navigating traffic, or being produced and delivered on time. How can you predict where and when your supply chain may fall prey to unforeseen black swan events?

Prediction is very difficult, especially about the future. (Niels Bohr, Danish physicist)  But there are likely some future risks that your stockholders are thinking about that you might be expected to have prepare for. The post event second guessing phrase: “You should have known, or at least prepared for” has been heard in many corporate supply chain offices after recent supply chain breaking cataclysmic events: tsunami, hurricane, earthquake, you name it.

  • What will happen to your supply chain if oil reaches $300 / barrel? What lanes will no longer be affordable, or even available?
  • What will happen if sea level rises, causing ports to close, highways to flood, and rails lines to disappear?
  • What will happen if the cost of a ton of CO2 is set to $50?
  • What will happen if another conflict arises in the oil countries?
  • What will happen if China’s economy shrinks substantially?
  • What will happen if China’s economy really takes off?
  • What will happen if China’s economy really slows down?
  • What will happen if the US faces a serious drought in the mid-west?

What will happen if… you name it, it is lurking out there to have a potentially dramatic effect on your supply chain.

As a supply chain manager, your shareholders expect you to look at the effect on supply, transportation, manufacturing, and demand. The effect may be felt in scarcity, cost, availability, capacity, government controls, taxes, customer preference, and other factors.

Do you have a model of your supply chain that would allow you to run the what-if scenario to see how your supply chain and your business would fare in the face of these black swan events?

Driving toward a robust and fault tolerant supply chain  should be the goal of every supply chain manager. And a way to achieve that is to design it with disruption in mind.  Understanding the role (and the cost) of dual sourcing critical components, diversified manufacturing and warehousing, risk mitigating transportation contracting, on-shoring/off-shoring some manufacturing, environmental impacts, and customer preferences, just to begin the list, can be an overwhelming task. Yet, there are tools and processes that can help with this, and if you want to be able to face the difficulties of the future with confidence, do not ignore them.  The tools are about supply chain planning and modelling. The processes are about risk management, and robust supply chain design. Profit Point helps companies all over the world address these and other issues to make some of the of the best running supply chains anywhere.

The future is coming, are you ready for it?

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