Coupling Art with Science in Supply Chain Design to Overcome Major Disruptions
Supply chains come in all varieties depending on their structure and organization, but even the most simple supply chains are inherently complex. That complexity, coupled with the multitude of disruptions and unplanned events of our world, can quickly derail a global supply chain. Most companies dedicate numerous resources to combat these disruptions, which also vary by industry, but here are several examples that nearly every business will have to address at some point while managing their operations.
- Natural Disasters: Every region of the globe is particularly vulnerable to their unique set of natural disasters. While these events tend to be localized, the ripple effects can impact nearly every cog in the network. For example, the tsunami that devastated Japan in 2011 impacted suppliers in Europe, consumers in North America and many other parties in between.
- Product Recalls: While there are many provisions in place to limit the number of recalls, they are part of doing business in consumer goods. However, out of an abundance of consumer caution, product recalls often damage consumer confidence and drive downward trends in demand. This also affects other manufacturers and retailers in that product category.
- Transportation Disruptions: Just in the last year supply chain professionals have been tasked with combating a driver shortage in the trucking industry and port strikes along the coasts. To overcome these challenges, companies must take other measures including considering privatized fleets and alternate modes and routes.
- Corporate Bankruptcy: There is a wealth of choice in today’s market and companies that cannot compete will often go under. This can cause distributors, retailers and consumers of those affected goods to be impacted and creates a need to have contingency plans.
- Political Unrest/Terrorist Attacks: These events are tragic and have known sociological, emotional and economic impacts. These events can disrupt manufacturing, supply and distribution facilities, as well as transportation systems. The most dramatic example of this was during the attacks of September 11 in New York and the subsequent week-long disruption to air travel and air freight movements throughout North America.
- Currency Fluctuations: Global businesses operate in numerous currencies and must pay attention to the fluctuations in the market. This can quickly translate into dramatic differences between profits and losses.
- Product Launches: Yes, even positive disruptions can have a variety of ramifications on an existing network. These impacts range from determining the right balance of on-hand inventory to knowing where to hold that inventory and eventually knowing how to adjust the transportation strategy to deliver the products from point A to point Z.
These challenges exist for nearly every company, but what separates the leaders from the laggards is how they manage them. This is why the correct application of technology is so important for companies to maximize the opportunities within their supply chain. The right enablers can help organizations model, visualize and understand their end-to-end supply chain and then apply the optimal design to ultimately uncover cost savings, improve service, enhance sustainability and mitigate risk.
But on its own, even the right technology is often not enough. Experience shows us that one can only reap the full benefits of supply chain optimization when it is correctly coupled with the innate talent and artistry of the person conducting the modeling. A well-trained supply chain practitioner brings this artistry to their modeling approach, thinking about their network in different ways that can maximize these opportunities. Inherent in the use of both art and science in supply chain design is the concept of simulation.
By having a technology platform that also allows for simulation, organizations are empowered to take their real-world supply chains and run scenarios that stress-test their proposed designs and vet out different strategies, and impacts on their network. As an example, a modeler could develop a scenario to help them evaluate what might be the ripple effects on their supply chain network if a supplier recall forces them to cut raw materials or components. This also helps to evaluate their options for shifting inventory due to a natural disasters making a location inoperable.
The options for simulation analysis can be limitless, driving the need for skilled supply chain professionals that can look at a challenge from the perspective of any outcome imaginable, but then harness those many options down to those that are truly feasible and can be implemented. This allows companies to achieve the correct go-forward strategy that incorporates all of an enterprise’s goals within the safe confines of the model, prior to implementation in the real world. When considering many of the nearly unavoidable risks we’ve discussed here, this is a safeguard that supply chain professionals can rely on.
This is the power of being able to imagine, design, simulate and optimize a supply chain.