As an industry, supply chains have invested billions of dollars in planning capabilities. This is necessary, of course, in order to efficiently produce and get products into the hands of customers.
However, as an industry we have done shockingly little in the area of how to deal with reality when things don’t go to plan. A well-known quote states, “No plan survives contact with the enemy.” We know that reality will derail our plans; it’s a given. So what can we do to combat this certainty?
There are only two things that really matter when plans don’t match reality:
The total amount of time it takes for you to do these two things is going to determine how much value will be eroded in your supply chain. To the extent that you can control the length of these events, you’ll be able to significantly reduce the impact on your well-crafted plans and business as a whole.
The first thing to understand is how interconnected our supply chains have become. It’s no longer just about monitoring the internal efficiencies that we have control of. You also need to be monitoring what’s going on with your external suppliers, partners, distributors, and even your customers. A delay from any supplier or partner can bring your plan to its knees, so knowing sooner about risks that your external partners are facing can help you avoid catastrophe. Understanding the potential impact of disruptions on customers can avoid a lot of misunderstandings, help you plan for potential changes in demand, and generally keep customer satisfaction high.
When identified early, you can predict potential impacts and take steps to minimize any disruption. For external hiccups, you can look to backup suppliers or partners to pick up any slack. For internal issues, you may be able to utilize other areas of your supply chain to cover. However, if the problems are not found until it becomes critical, the entire business can be put at risk as customers are impacted.
The impact increases exponentially as long as the issue remains unresolved. An issue at an external supplier can sometimes take up to 6 weeks or more for its downstream effects to be felt by customers at the other end of the supply chain. Factors that contribute to this delay could include the length of time between regular communications with suppliers (e.g. taking 1-4 weeks before you are made aware of the impact of the incident on the supplier), transportation across multiple regions or countries (which are felt immediately but might not have been foreseeable), visibility into the potential impact of a delay or shortage on the larger production process (even inexpensive items can be critical to your supply chain), etc. In a worst-case scenario, customers will be directly affected, with frantic calls to sales and customer service to mitigate the fallout.
There are three primary ways in which a digital platform can help speed up your time to identify and resolve potential issues:
New platforms can provide services such as geomapping all of your suppliers. This allows you to identify which suppliers, internal or external, might be impacted by an unexpected situation that may occur, e.g. a natural disaster (such as a hurricane or earthquake), an incident at a port of entry (that could delay deliveries), etc. This can eliminate the delay of 1-4 weeks where you would not have even been aware of an issue until you were updated at a regular meeting.
Similarly, if your system is tracking the timeliness of deliveries, you could be alerted the minute the first shipment starts missing its milestones. Knowing what’s on that shipment, you can decide how great the downstream impact will be. A raw materials alert from your factory sites that a certain item isn’t arriving on time or at lower volumes can give you an early heads up of a potential issue.
The ability to rapidly assess and prioritize is a key capability of a digitization platform. In most cases, the same criteria are used to evaluate priority: What's my inventory position? How am I balanced around the world? How can I expedite this? Look for systems that can evaluate these factors automatically to speed up the impact assessment and provide insight to the decision makers in your organization.
Finally, collaboration is critical in order to quickly work together to solve the problem in a time-efficient manner. Often supply chains are siloed internally between different functions. However, customer and suppliers could be considered their own silos as well. The ability to make the best possible decision requires cross-silo collaboration. If you are a global organization, make it possible for supply chain managers going off-shift to hand off incidents to supply managers who are coming on-shift for 24-hour coverage. By fostering collaboration, sharing of information, and making a commitment to working together, solutions can be found and implemented in record time, rather than trying to coordinate through one-off communications and ad-hoc meetings.
Proactive alerts can help reduce the Time to Discovery significantly, and automated prioritization and improved collaboration can dramatically reduce your Time to Resolution. In both cases, that added time helps minimize the downstream impact to the supply chain, reduces your costs, and maximizes customer satisfaction.
Once you have a system that identifies and logs incidents and resolutions, you essentially have a database at your disposal which you can use to analyze your closure speed and variability between your plan and actuals. You can now determine your total supply chain risk profile at any point in time, where incidents are coming from on an ongoing basis, and then dive deep to see what is driving those metrics.
The figure above shows some of the sample reports you could generate to help you understand your progress and improvements over time. The more you focus on reducing your time to identification of a problem and the time to resolution, the more you’ll be able to minimize the impact of variations and reduce stress within your entire organization.
Let’s face it. Bad things will always happen to good plans. Digitizing your supply chain can provide meaningful oversight and insight into your operations and continually improve your reality-combat capabilities. Your ability to manage unexpected events will drive customer assurance, allow your team to focus on the right things, and maximize overall enterprise value.
For more from Katherine Ross, register for her upcoming webinar on June 13, 2019.