Are you Ready for the Unexpected? Demand and Supply Chain Professionals Play a Critical Role in Managing Risk

Curtis Brewer

Curtis Brewer

It’s a warm June morning in Omaha, the phone rings and you answer.  The man on the other end of the line explains that there has been an explosion at your production site in North Carolina, thoughts race through your mind, first to the safety of your employees, then to the condition of your site.  This was the scenario played out by the employees of Con-Agra Foods this past June 9th when an industrial accident caused an explosion that left three employees dead, a large number more severely burned, and the south wall of the building in Garner, North Carolina gone.

As extreme as this example may seem this is just one of many types of unexpected events that occur around the world daily that Companies need to be ready for.  Today more than ever in the past, companies are taking the time to identify areas of risk and also what they would do if those events occurred.  They are categorizing their risks, determining whether they are discrete or continuous events, and what it would take to recover from them.  More and more they are modeling the events and affixing a cost to them in order to better understand the total impact they will have on their businesses.

Risk is something that we should all be aware of and better understand.  As a Demand Manager how do you capture risk in your business in your planning?  In a lot of companies today, the Sales and Operations Planning meeting has become one area where risk is openly talked about and planned for.  This real world discussion helps to keep the business informed and also allows for appropriate scenario planning.

In the AMR Quarterly Study of Risk, Kevin O’Marah highlighted the vast change in the perception of risk by Supply Chain managers in the last 12 months.  Supply Chain managers are beginning to move away from IT investment as the best way to mitigate risk toward collaboration and modeling.  They are also working to refine and strengthen existing processes to better safeguard against unexpected events.  They are also working to better educate and inform their employees about what steps are being taken in regards to Risk and how those employees play a role in the process.

As globalization becomes more and more prevalent throughout our lives, we enjoy the benefits of lower cost goods, but we also live with greater levels of risk in terms of our supplies.  This higher level of risk has created a lot of cases for our businesses to get better at this critical part of daily operations.  The best news is that we as Demand and Supply Chain professionals have a critical role to play in helping our companies to weather these storms.  So I ask are you ready for the unexpected?

The Institute of Business Forecasting & Planning – IBF and I look forward to your comments and thoughts.

Curtis Brewer
Head of Consumer Forecasting
Bayer Crop Science

See CURTIS BREWER Speak at The IBF’S:

$695 (USD) for 3 Full Days!

October 12-14, 2009
Orlando Florida USA

One Response to Are you Ready for the Unexpected? Demand and Supply Chain Professionals Play a Critical Role in Managing Risk

  1. Curtis,
    If you look at the top ten items in Kevin O’Marah’s Figure 1 on Top Supply Chain Risks, you’ll notice the word ‘volatility’ showing up four times in association with supply chain costs and also volatility is implied in the fourth item on consumer spend in the context of volatile demand. Demand planning has typically focused on trying to accurately predict and manage demand and revenue and as we know, forecasting can only go so far in reducing risk. Differences between what was forecasted and the actual demand that arrives requires a company to be able to respond quickly and confidently in order to meet revenue and customer service targets. The same can be applied to the cost side of the equation. Risk mitigation strategies like dual sourcing and longer term supply contracts often cannot be applied across the board and therefore risk associated with volative costs will continue to be a real concern. Again, you need to have the ability to react confidently when significant cost changes occur. To do this, you need to be able to accurately model the impact of those changes as soon as they occur in order to understand the true impact on the business. ‘Real-time’ business modeling will continue to be an important risk mitigation strategy in itself because only a certain amount of risk can be ‘planned away’.

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