Like microchip fabrication and other complex engineering tasks, the supply chain is full of uncertainty. The best way to handle uncertainty is to deal with it up front, instead of trying to sweep it under the rug in the misguided hope that if the corners of the rug are stapled down, it won’t escape and manifest as a supply chain disruption. So how do you attack uncertainty head on? You approach it like an engineer.
A recent blog post on the HBR blogs on how engineers manage uncertainty had some great advice on how to handle uncertainty like an engineer.
- Acknowledge the Uncertainty
Ignoring it never works. Do your best to quantify the worst-case scenario, to mitigate as much of the uncertainty as you can, and to deal with the repercussions should it come to pass. For example, if you’re shipping a lot of product from China and the cargo ship sinks, and the holiday season is fast approaching (and it’s when you do 70% of your sales), if you have a dual sourcing strategy in place, you would quickly ramp up (overtime) production in the manufacturing facility where product can be manufactured and shipped to your warehouses in less time than it takes to ship them from China.
- Have a Plan
Working through a plan to deal with potential uncertainties helps to not only deal with repercussions when something happens, but to minimize the chances that something unexpected will happen in the first place. For example, if you realistically expect that 3% of products shipped to you will be faulty, you will order 103.1% of expected demand.
- Break Down the Process
This lets you analyze each step carefully and understand not only where the risks can arise, but how to mitigate the risks and prevent them from occurring in the first place. If the risk is transportation, because there is a high risk of a truck being hijacked for valuable components, you’d add security and possibly split the shipment in half to increase the odds that at least some product makes it to you quickly.
If all team members on a cross-disciplinary team work together, not only is there a greater chance of identifying all uncertainty, but there is a greater chance of coming up with production plans that minimize uncertainty due to more creative power being available. For example, let’s say the product is fragile and the uncertainty lies in how many units will survive multiple shipments from factory to warehouse, warehouse to store, and store to consumer. More mind power increases the chance that a sturdier design will be found or that better packaging will be identified.