Category Archives: Supply Chain

A Major Disruption to Supply Chains Occurs Every Day – Is Yours Ready?

In 2013, Resilinc, a provider of supply chain resiliency soutions, reported 355 major Event Notifications that significantly impacted all supply chains that were in the vicinity of, or connected to, the event, which included natural disasters (hurricanes, floods, earthquakes, volcanic eruptions, tornado, extreme weather, and other force majuere events), man-made disasters (factory fires/explosions, power outages/shortages, factory shut-downs, chemical spills, etc.), extreme economic events (labour strikes, bankruptcies, port disruptions, levying of major fines, etc.), geopolitical events (acquisitions, rioting, FDA actions, etc.), and recalls, to name a few. Some of these events, such as bankruptcies, were localized to a few dozen companies that depended on the supplier that went bankrupt, but others, such as the Solomon Islands earthquake and tsunami off the coast of Japan or the Haiyan Typhoon in the Philippines (that wiped out a number of coastal cities) affected thousands of sites and the tens of thousands of supply chains that depended on the suppliers that had factories, warehouses, and/or other operations at those sites.

The impact of these events on their respective supply chains ranged from tens of thousands of dollars to hundreds of millions. If a factory that produces a critical single-sourced component for your most profitable product line is destroyed, the costs associated with finding a new source — which include, but are not limited to, manpower costs, premium production costs, premium raw material costs, downtime costs, lost customer costs, etc. — add up quickly and can easily run into the tens of millions for large high tech, equipment manufacturing, aerospace, and automotive companies.

But if your company is prepared, most of these costs can be mitigated. How do you prepare? You make the right investments in supply chain resiliency. To find out how to get support from the C-Suite for these investments, tune into this Wednesday’s webcast on Justifying Investments in Supply Chain Resiliency in 2014, sponsored by Sourcing Innovation and Resilinc.

10 Years Ago Today Gave Us Proof That Even the Improbable Is Likely

When a decomposing sperm whale spontaneously exploded in the town of Tainan, Taiwan whilst being transported for a postmortem examination. (Source: Wikipedia) The exploding whale splattered blood and whale entrails over surrounding shop fronts, bystanders, and cars. No one was hurt, but likely quite a few people were shocked. Plus the blood and other stuff that blew out on the road was disgusting, and the smell was really awful.

This just goes to show that no matter how unlikely a disruptive event is in the context of your supply chain, it could still happen and you should be prepared when it does.

Justifying 2014 Investments in Supply Chain Resiliency

Are you looking to justify investments in supply chain risk and resiliency programs in 2014?

Can you determine a return on investment (ROI) from investing in supply chain resiliency?

How are other organizations leveraging supply chain resiliency solutions to drive real business benefits?

If you want to learn the answer to these questions, and more, attending the complementary upcoming webinar from Resilinc and Sourcing Innovation on Justifying 2014 Investments in Supply Chain Resiliency on January 29, 2014 @ 11 am PT, 14 pm ET, and 19 pm GMT.

Supply chain resiliency is becoming more important daily because the frequency, magnitude, and associated costs of supply chain disruptions are steadily increasing.

This webinar will examine the different types of cost savings and examples that can be obtained through a proactive supply chain risk and resiliency strategy based on multi-tier supply chain visibility.

Looking forward to seeing you there!

It Shouldn’t Be Hard to Justify Investments in Risk Avoidance

But if it still is, despite the enormous losses that many firms have sustained in recent years as a result of mega-disasters, a recent article over on Supply Chain @ MIT on “Justifying Investments in Risk Avoidance” by Yossi Sheffi (author of The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage) provides you a good starting point.

The article outlines three possible approaches for presenting a convincing case for investments in supply chain resilience.

Approach 1: ID Situations Where Resilience is a By-Product

Some actions taken by business will increase resilience even though the objective is entirely different. Examples include investments to insure superior service, postpone production (to adapt to market shifts), and adapt to different (raw) materials and components if the current primary (raw) material or component becomes unavailable. If another business justification can be made for the investment that will be looked upon more favourably by the C-Suite, focus on that justification (and that justification alone).

Approach 2: Highlight Other Benefits

If the investment is, or will be, primarily to support resilience and no business case can be made without mentioning resilience, be sure to highlight any and all additional benefits the business can expect to receive. For example, if the investment in resilience will improve operational efficiency, provide additional capability, or even improve the image of the organization it will be worth it. The example Sheffi provides is that of Walmart’s Emergency Operations Center (EOC) that manages flow of supplies in crisis situations. Many days before Hurricane Katrina hit the Gulf Coast in 2005, Wal-Mart had prepared 45 trucks full of critical supplies at its distribution center in Brookhaven, Mississippi. By deploying these trucks Wall-Mart reopened 66% of its stores in the affected area within 48 hours, and within one week 93% of stores were reopened. This boosted Walmart’s image in a way nor advertising campaign ever could!

In addition, a resilience effort that maps the supply chain, at least for critical goods and services, down to the raw material suppliers not only supports quicker responses to crises, but can also be used to support social responsibility and sustainability audits. Not a money-maker by any stretch of the imagination, but it can do wonders for the brand if you can show that your supply chain is, for example, free of conflict diamonds when your competition’s supply chain is not.

Approach 3: Hitch Resilience to Other Goals

In this approach, when you cannot find another justification or highlight the benefits enough to get approval, you take on the role of a PR spin doctor and show how the effort can contribute to another, sometimes entirely unrelated, goal. The example given by Sheffi in this case is if you need most, or all, of your staff to be able to telecommute in the event of a crisis, present the project to support this as a diversity and inclusion initiative that would allow mothers to stay with their babies and empower disabled employees to stay active. It’s not an optimal approach by any means, but if the shoe fits …

It’s good advice from a great article. And for those of you in logistics, Sheffi recently published Logistics Clusters: Delivering Value and Driving Growth that you might want to check out. (Clusters can also be a form of resilience.)

8 Key Design Considerations for Optimizing Your Demand Planning Process: Part II


Today’s guest post is from Josh Peacher, a Senior Consultant in the Operations Practice of Archstone Consulting, A Hackett Group Company.

In the first installment, we focused on defining the 4 basic design considerations for optimizing your organization’s demand planning process. These considerations included:

  1. Utilization of time series forecasting and exception management to drive a base forecast
  2. Selecting the right software tool for your business
  3. Identifying a set of core metrics and KPIs that help to identify opportunities and drive accountability
  4. Effectively leveraging external information to elicit a more accurate forecast

These design considerations are foundational in nature and effectively addressing each will ensure that your organization’s demand planning process has a solid base. However, to truly move the needle towards world class performance, a set of more advanced considerations must be applied.

5. Drive Towards a Consensus Demand Plan

A formal demand planning process should conclude with an aligned set of forecast numbers that the entire organization understands and can speak to. This doesn’t necessarily mean that a “One-Number” forecast must be reached as this can be very difficult and cause a whole set of different issues. However, organizations should look to align on a set of numbers and be prepared to speak to and manage to the gaps. Key participants in the consensus demand plan conversation include Sales and Account Teams, Finance, Supply Planning, and Demand Planning. Each of these groups will bring a different perspective and set of information to the discussion resulting in a more informed final demand plan.

6. Identify the Right Level of Detail

When defining the appropriate level of detail to forecast at, leading companies strike a balance between importance to the business and complexity of the process. The diagram below defines a general set of guidelines for identifying the appropriate level of forecast detail based on the situation. As a general rule of thumb, the more important and complex the set of items is to the business, the higher the required level of detail and rigor.

Complexity vs. Importance

7. Ensure Adequate Resources

As I mentioned in the first installment, demand planning is commonly an overlooked element of supply chain planning. This often leads to an insufficient allocation of resources by the organization. Demand planning is an arduous process that requires a high level of dedication and attention. More times than not, I see organizations that have failed to realize this and leave their demand planning team without the necessary bandwidth to perform effectively. The net effect is a less accurate forecast, poor demand signals trickling through the system, and a higher turnover rate. A few simple rules of thumb to ensure that your organization is not falling into this trap include the following:

  • Install dedicated analysts for demand planning.
    This will ensure that demand planners are focusing on value-add activities and have the right information on hand to make informed decisions.
  • Make sure that your demand planners aren’t wearing too many organizational hats.
    It’s an odd phenomenon but demand planners often end up taking on responsibilities that are well outside of their job scope and not essential to their core function. The best way to decipher this is just to simply ask them where their pain points are. Trust me … they will tell you!
  • Understand which segments are the most critical and complex to the business and distribute them across your demand planner resources.
    Ideally, each of your demand planners will have a portfolio of demand responsibilities that are evenly distributed amongst the four quadrants of the above diagram.

8. Define your Organization Process Model

Too often I have seen organizations operating in an environment of chaos because they lack a defined process and cadence for their demand planning cycle. You may believe that you have a process in place, but can you articulate what it is? Can the demand planning resources in your organization define the calendar of events that make up the process? Many times what people believe to be a process is actually floating tribal knowledge and tends to vary depending on who you ask within the organization. Without a well-defined process, it’s difficult to hold others accountable and overall performance tends to suffer. An optimal process must be defined for each organization based upon it’s unique set of variables and constraints. However, the list below is a set of monthly activities that can be found in most leading company processes.

  • Prepare Data –
    Cleanse and gather all required data for the demand planning process (internal and external)
  • Generate Initial Forecast –
    Generate both the base statistical forecast and manage exception SKUs manually
  • Incorporate Market Intelligence –
    Collaborate with trade partners and external contacts to incorporate quantitative and qualitative data into the forecast (e.g., POS Data, Customer Forecast, Promotional Calendars, Pull-Forward Buys)
  • Consensus Reconciliation Meeting –
    Meet with sales and finance to reconcile the bottoms up forecast with top down financials and sales forecasts
  • Refine and Publish Final Forecast –
    Make final adjustments to forecast before transmitting to ERP
  • Monitor Performance –
    Monitor forecast for large anomalies and diagnose root cause of error

Thanks, Josh!