Ignorance isn’t bliss – it’s a supply chain nightmare in the making

Supply Chain Risk ManagementAll supply chain managers are only too keenly aware of the fact that transporting freight around the world in this day and age is fraught with potential problems. With climate change worries constantly being broadcast, severe weather events around the globe, natural disasters such as earthquakes, eruptions and tsunamis stacking up, who knows where the next serious disruption will hit?

Of course this is all in addition to the ordinary operational supply chain issues that are encountered from day to day; dockside strikes, train derailments, and serious road traffic accidents. What it all amounts to is that disruptions of one kind or another are par for the course in global supply chain operational terms.

With no other recourse than to accept what disruptions occur in global transport terms, companies are faced with mounting responsibility for increased transit times, and additional costs in respect of taking whatever measures are necessary to try and expedite shipments.

While serious so-called “black swan” episodes can potentially disrupt any supply chain anywhere around the globe, ordinary everyday threats such as freak weather conditions, accidents and road network maintenance can all add their costs to an already escalating bill, seriously impacting on bottom-line performance.

The dangers of lack of visibility within the supply chain

The biggest and most frequently occurring problem with global supply chain management in these situations is lack of visibility. In many instances this invisibility of what is going on in the supply chain is often diluted down because responsibility for logistics and transportation has to a certain extent been outsourced.

Another often experience problem is that the visibility data has been scattered over a number of different systems, and is simply inaccessible when needed, because nobody has taken the responsibility to put everything onto one common, easily accessible platform.

But whatever the reason, the end result is the same; the lack of ability to drill down and see what is happening within the supply chain can be completely disrupted when the problems strike.

If supply chain owners don’t have a thorough understanding of the operational aspects of their supply chains, or have visibility to track where assets are within the system, it is impossible to forecast what impact certain events will have on shipments that are either already in transit, or that are in the dispatch process.

Lack of visibility results in lack of action

It therefore means that supply chain managers do not have the information available to them in order to mitigate the problem. Because of the lack of visibility it means that critical time will have to be wasted trying to find out where shipments are, and what effect the problem will have on them. Often the only information available is through the public media, and these reports have been generated for good viewing figures on TV rather than being of use to supply chain professionals.

Because of this, customers and end users not kept up to speed with what is happening with their orders. They will often only ever find out when the supply chain owners themselves find out, or in a worst-case scenario, may sometimes find out even before the supply chain owners have found out. It means that alternative courses of action are not even thought about until it’s too late. Once again this may result in supply chain owners having to throw more money at the problem to try and solve it, or losing out on customer orders altogether.

Seeking a proactive alternative in supply chain risk management

The fact of the matter however, is that it doesn’t have to be this way. Just picture a global manufacturer who buys, sells and distributes products all over the world. If a company in this situation was able to have clear visibility of all of its facilities, its suppliers. the various routes to warehouses, its distribution centers, and it’s customer’s and their whereabouts all imprinted onto what in effect would be a digital map; think how, if this was then overlaid with a transport infrastructure, showing the various sea, air and road network routes; that company would then have all of the information at its fingertips which could then significantly changed the balance of power and control.

While the problems may still occur, when they do, they become immediately apparent and allow mitigation plans to be brought into play.

If companies and their supply chain managers had all of this information at their fingertips, now imagine what could be engineered if in addition, the company also access to large amounts of Big Data from all of the various risk sources, on the same supply chain platform.

If this platform was constantly sampling the data in real time, looking for possible disruptive risk events, problems will not only be notified and monitored with immediate effect, but the problems may even be able to be forecast.

When a disruptive event either takes place or appears on the horizon, alert, assess, and act actions could then be triggered, resulting in issuing an automatic alert to be broadcast to the managers of the supply chain, and whoever else they deemed prudent to be informed at that time.

This brings the reaction time down to immediacy, and if the event is a forecast one rather than an actual happening, the warning becomes a proactive event rather instead of a reactive one.

Proactive supply chain risk management in action

To illustrate a disruptive supply chain event in greater depth let’s assume that the supply chain owner is a business operating out of Boston. When the first signs of the winter storms that hit last year were broadcast, it would automatically trigger an automatic alert in the supply chain control panel advising the supply chain manager(s) and anyone else included in the initial loop.

When the supply chain personnel then click on the alert they would be able to predict the potential impact that the storms would have on their supply chain, as they would be able to see all of the assets that could be put at risk, each with a current supplier name shown against it including that supplier’s location, plus the supplier’s points of contact.

Supply chain managers would then be in the position of being able to take immediate action by whatever method they preferred (email, phone, or text) to ascertain the effect that the potential disruptive event could have on the specific orders. They could then simultaneously contact each supplier that the event was forecast to affect, in order to ascertain that supplier’s ability to fulfill outstanding orders in light of the impending disruption. This entire process could be fully automated to speed the process up rather than contacting each supplier separately one after the other.

In this new scenario of immediate reactive or proactive action, awareness is immediate. Because of this, mitigation plans can be put into motion at the earliest possible opportunity. If this capability is shared throughout the supply chain with all supply chain members they will be able to see the potential disruption for themselves.

Pre-planning and pre-programming anti-disruption solutions

To take supply chain risk management to the next stage, companies should determine alternative mitigating action plans. This means that not only do supply chain managers become immediately aware of impending disruption and know what action to take, but they can also place certain orders on hold with suppliers under immediate risk, and enquire with other, alternative sources as to their ability to handle replacement orders in order to avoid total product disruption.

Automatically minimizing disruptive events

By introducing self teaching software into the supply chain operational scenario, each time a disruptive event happens, the system can learn from all of the events that took place, and the mitigating actions that were brought into play. This historical information can be overlaid onto the digital maps for clear referencing. This would allow supply chain managers the ability to analyze the degree of risk in any particular location, based on historical events, something that could prove very useful.

The final control for bringing mitigating plans into action can be reserved for human judgment and authorization as and when required.

Avoiding a potential disaster in the making

We started out by saying that supply chain ignorance isn’t bliss, it’s a potential disaster in the making. Not being aware of potential and actual disruptions within the supply chain is just not acceptable. Ensuring that there is end-to-end visibility throughout the supply chain will bring potentially disruptive events to immediate light, enabling immediate decisions to be made to minimize the disruption.

But it’s only when supply chain owners go to the next level by formulating contingency plans for a disruptive event that could occur, that this knowledge becomes invaluable. In the worst-case scenario it means that disruption will be minimized as far as that is possible. In a best case scenario it means that disruptions could be totally avoided when mitigating plans are automatically instigated by the supply chain operating system.

It’s worth the investment in terms of ROI and bottom-line stability

It does mean that an awful lot of work has to go into the mix in advance. Supply chain software has to be updated to be able to take advantage of things like Big Data. The fact of the matter is that all the information that is needed is out there in the ether somewhere. It’s just a matter of getting access to it, downloading it into the supply chain data banks, carrying out a thorough data analysis, and taking the pre-programmed intuitive action.

Although there will be a significant cost up front in terms of employing this strategy, the benefits both in terms of ROI and the saving effects on the bottom-line could be enormous.

Do you still rely on fire-fighting to deal with potentially disruptive events in your supply chain? If you do, what do you think the cost might be in terms of escalating costs to expedite orders and ultimately losing client loyalty? Would you recommend the new breed of supply chain risk management software to your board in order to mitigate risk? Have your say at the feedback section below.

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