I think you will agree that we have been hearing the word “disruption” more than ever, and our supply chains are having a hard time with the ongoing pandemic, natural disasters, tariffs, and trade wars, and all sorts of other supply chain “disruptions.”
I cannot be the only one thinking that the Suez Canal blockage was a bad joke the first time I heard about it. Now, we have this famous crack in the Hernando de Soto Bridge and cyber hacking the major oil pipeline in the USA. These disruptions and unexpected situations will always be there to put more stress on supply chains. What’s more, analysts foresee in the next three years supply chains will be characterized by ‘disruption and reimagination.’
Started with toilet paper shortage, continues with semiconductors
Starting from the beginning of the pandemic, we have been experiencing these shortages in various industries. Spending more time at home, there was a spike in consumer electronics, which caused a semiconductor shortage. For the ones who don’t know what semiconductor is, it is the reason the new gaming consoles, laptops, or cars unavailable at the moment.
This tiny but critical component is also used highly in the automotive industry. Considering the fact that global demand for cars has bounced back from the pandemic slump, the automotive industry will probably suffer heavily from the shortage during the year. Some car manufacturers decided to temporarily shut down factories that manufacture lower-priced lines, some still couldn’t start running because of the global shortage of semiconductors.
It’s hard to believe that we may not be able to deliver my cars to dealers because my high-end car seats require this tiny chip, which none of my suppliers currently have? Then, what’s the point of having demand forecasting if there are events I cannot forecast?
Be Prepared for the Plan B to Z
None of us is a seer and planning is not about knowing what is going to happen in the future. It is about making yourself ready with what-if scenarios, in case something gets off track. How would my supply chain react when there is a shortage of this component? What are my supplier options if I face demand volatility? Would diversifying my manufacturing and supply network geographically help me mitigating the shortage risk? and so on.
And let’s be honest, things don’t go according to plan all of the time – if ever. Think about this ship at the coast of Sri Lanka, which is burning for the last seven days. Who would guess a vessel carrying chemicals burn out of nowhere, right? Well, to paraphrase an American saying, “Ship happens”.
Integrated business planning enables us to match the different opinions of the market, with the growth objectives, with the resources owned. It helps businesses re-allocating the resources for the plan B to Z; by doing so businesses can execute the possible steps a lot faster in the future.
“Without planning ahead, companies will end up in just firefighting in reactionary models,” saidDavid Vallejo, Global Head of Digital Business Planning at SAP.
Integrated business planning prevents ad hoc firefighting; it generates end-customer satisfaction through better service levels and lower out-of-stocks. Optimizing inventory and generating a consensus plan through S&OP are critical to meeting customer expectations. To be honest, the shortage is not the customer’s problem, the way the manufacturer is dealing with the shortage is the customer’s problem. Don’t we all hate to see “available in 6 weeks” text next to the order button? Waiting too long for a product just kills the hype.
Aim for the Disruption-Tolerant Operations
When it comes to managing the complex supply chains, being able to see what is happening within your business is only part of the visibility challenge; seeing outside of your four walls by enabling extensive collaboration with other supply chain partners and customers is the other. Making use of this extensive visibility with an agile response is the key to unlock the supply chain resiliency.
So, the quotation is simple. Visibility + Agility = Resiliency.
There are various capabilities required to achieve supply chain resiliency, but planning is at the core of this great orchestration. If you can address the current pain points within your business, you can predict and simulate the impact of possible disruptions.
Imagine you are producing high-end gaming laptops and a specific component is crucial for one model. You can make your risk due diligence estimates a natural part of your sourcing and procurement strategy and diversify your sources to confidently respond to disruptions.
Connect to Simulate What-if Scenarios
The idea of building a resilient supply chain is to dominate the disruption, not to be disappointed with its destructive effect. To achieve this, businesses should be able to sense issues and opportunities and respond quickly and effectively to adjust their supply chain operations.
Utilizing a collaborative platform by bringing buyers, suppliers, and other trading partners together helps businesses to improve resiliency, as well as mitigate the possible risks and optimize the opportunities. Some of the big companies are still using excel sheets and old-school peer-to-peer data connections to store and maintain data. Not only they require an enormous effort to do so, but also they are fragile and extremely time-consuming when it comes to these recalibrations.
Let’s continue with the laptop example. As a brand owner, you want to work with a specialized vendor for the components and then drop ship them to your contract manufacturer, who actually builds your product. Bringing all your supply chain partners into a common platform enables each of the parties to have great visibility, and gives you a chance to take better-informed and agile steps.
Integrated business planning brings all the supply chain functions together from design to operate. Sharing the real-time data in a collaborative single-platform enables organizations to utilize the demand signals into a solid plan, make recalibrations that reflect what customers want, ease the hand-off phase from manufacturing to the logistics provider, and track the end-product during the operations phase.
We plan in the perfect world but execute in the real world. We don’t plan for a canal blockage, a bridge closing, a key component shortage, or a global pandemic. But we have to execute in this environment. We need the ability to be quick in planning and re-planning when things don’t go according to plan.