What if we are not in control of our business supply chain? What if the front line is decided by your suppliers stronger positioning? What if we are at the whim of the logistics companies servicing our movement of materials? What if our customers do not communicate to us and send order in with short lead time and expect you to deliver or the lack the necessary forecast we need to have in order to maintain some sanity?
These are the worst nightmares and nobody wish to be in this situation. But what are the chances of one of the above scenario will occur?
Let look at the key situation which can actually happen.
- Scenario on Supplier
Imagine one day of the blue, a key supplier call up and inform that they are going out of business in the next one month and you have about less then 4 weeks to find a suitable supplier.
OR
An order to a supplier and on the day the material due to be delivered, they call and inform they cannot fulfill the contract.
- Scenario on Logistics
The contracted transporter decided that they cannot arrange the logistics that you needed due to an unforeseen circumstances
OR
A strike call by union to demand better benefit and end up with undelivered materials
- Scenario on Customers
A major customer placed a unplanned order and demand that this must be fulfill as per agreed delivery plan even if this order is 100% above normally ordered quantity
OR
A email from a customer who inform you that from next month, their order will be reduced by 50% and the inventory in your warehouse are piling up as the concept of push supply chain sttrategy.
What will you do to stop these from happening? Mitigating risk need to be always on supply chain practitioner "to do list".
Strategies need to be in place and among them are as following:-
PREVENTIVE STRATEGIES
Conduct Risk Assessment on the Supply Chain - a annual risk assessment is highly recommended and analyses potential landmines. Using DMAIC technique (Define, Measure, Analyses, Implement and Control) may be useful. Using this technique, we may stimulate a potential problem, or an existing issue and review what can be done to improve the situation. Other technique which will be useful will be SWOT, PEST and Proctor 5 forces model.
Engagement Policy - keep communication channel active all the time even when there seem to be lack of activities on some of the account. It help to anticipate issues.
Stratification system in place - suppliers can be group by critical or non critical categories for example. Further breaking it up into by geographical location, lead time of supply, stability of each operation. Strength on this strategy allow us to see from a bird eye view of the overall picture.
Always have a backup plan - when planning for efficient running of the total operation, spend a few minutes to ponder what can we do if the plan collapse. Where the plan B? But not all issues can have a plan B but it is wise to have alternative plan for major decision just in case it does not work out.
Stimulating the worst case scenario - it help to determine how prepare the operation if the worst occur. It actually a tool to confirm if we are ready for any eventualities.
Have a reliable intelligent report - no, we are not going to run the business like CIA or some security apparatus. But intelligent report on the market and your supplier movement and situation and your customer official standing to the relationship is critical. If for example you have a customer who begin to negotiate with your competitors for deals, these are serious sign indeed for concern and arrange appropriately what to do next.
PESTLE Analysis - run out a political, economic, social, technological, legal and environment analysis to look into the various issue which will impact the supply chain.
SWOT analysis - produce a strength, weaknesses , opportunity and threat analysis specifically on the overall supply chain operation and look into issue which may impact the efficiency of the operation
No plan will be fool proof but it is better then no plan at all to prevent an incident.
LACK OF PLANNING IS THE CAUSE OF MOST FAILURE!
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