How would your organization recover from a supply chain
interruption and what impact would it have on your customers?
In today’s global economy, complex supply chains cross many countries and involve several different transportation modalities. Products distributed in the US, for example, are often assembled in another country and the suppliers for the product components may span several countries.
Raw materials, supplies, and finished products are susceptible to interruptions from natural disasters, terrorism, theft, civil unrest, disease, strikes and more. Additionally, emerging markets offer the opportunity to create inexpensive materials, but often lack critical infrastructure in energy and transportation.
Organizations are relatively very good at forecasting the manufacturing, warehousing, and logistics costs to produce and distribute a finished product, but any interruption in the supply chain could have a major impact on your projections. However, they often underestimate the effects an interruption to the supply chain can have on overall company costs.
Understanding the risk to your supply chain and knowing where you are vulnerable will allow an organization to mitigate the risks and create a continuity plan in the event of an interruption. If this process is not implemented at the planning and forecasting stage then bottom line margins will take the hardest hit.
If knowing this seems so fundamental to the planning process how come so many major international corporations fall victim to loss from major supply chain disruptions every year? Although there may be many reasons for this, I would like to discuss two of them:
1. It is not in the Culture of the organization to ask the right questions. Procurement generally sees their job as sourcing the best products and services at the least expensive price. They usually deal with a company’s headquarters and never ask where the manufacturing or distribution facilities are located. As long as the vendor says they can produce and deliver the product at the given price, procurement personnel have done their job.
2. There is a lack of supply chain visibility. This plays in a little with number one; not knowing where the suppliers facilities are located but it is much more complex than that. There are huge gaps in most organizations supply chains where the product is in transit and accountability of process and visibility become non-existent.
On February 25th 2014, I will be speaking at the IBF Supply Chain Forecasting & Planning Conference being held at the Hilton Scottsdale Resort & Villas in Scottsdale, AZ about the reasons organizations need to understand the risks and vulnerabilities to their supply chains and how to mitigate against them using process and technology.
Sr. Director, Lucena Group