Supply Chain Planning When Everything Keeps Changing

Effective planning and control are pivotal for managing any supply chain, yet even the most carefully thought-out plan can be thrown off course due to unforeseen and deeply uncertain events. For example, consider the auto industry, which faced a shortage of semiconductors brought about, in part, by the COVID-19 pandemic. As a result, millions of vehicles that otherwise would have been manufactured were not produced, costing the industry hundreds of billions of dollars in lost revenue [1]. Recent strikes by roughly 13,000 union workers have temporarily halted production at automotive factories across the U.S. [2], and a recall was recently announced of 52 million air bag inflators [3]. These disruptions are bound to throw a wrench in many supply chain managers’ plans.

So, how can supply chain managers make meaningful plans when everything keeps changing? The origin of the word “plan” comes from the idea of a map [4]. If an explorer wanted to discover a new part of the world, they would need a map to show them where to sail. Having a good plan is a lot like having a good map, in that a good plan helps you figure out how to navigate from where you are to where you want to be. But there are risks inherent in any journey. Maps of the world from antiquity used to include pictures of fanciful sea monsters that alerted sailors to potential uncertainties and dangers lurking ahead.

Just as storms and shipwreck can disrupt a voyage, there are many things that can disrupt a supply chain plan. Like a GPS system that can reroute you when there is unforeseen traffic, supply chain plans need to be flexible and adaptable as situations change, while still directing the organization to its envisioned objectives. That is why one of the most important steps in any risk management activity is risk identification. When performing risk identification, one tries to think of as many ways as possible that a plan can go wrong.

Only after a set of potential disruptions has been identified can potential remedies be found. Consider the example of a potentially unforeseen disruption: congestion at container ports resulting in delayed shipments. Some strategies that manufacturers can use to build flexibility into their supply chain plans might include [5]:

• Flexible shipment rerouting: Are there other ports that are experiencing less congestion? Can alternative means of shipping be used, such as rail or air?
• Shifting production schedules: Is there any slack in the production schedule that could allow for a delay in the delivery of goods?
• Finding new sources of supply: Are there domestic suppliers that can provide the products that are needed?
• Increase stocks of critical inventory: Is it possible to increase the store of inventory for critical inputs? Could other policies such as reorder points be changed to accommodate for longer lead times?

In addition, building flexibility to disruptions requires close collaboration across the supply chain. With suppliers, this might take the form of collaborative planning and information sharing to identify and resolve problems. With customers, clearly communicating shipment delays can help ease anxiety and retain customer loyalty. Supply chain analytics and technology can further facilitate flexibility by streamlining the acquisition, storage, analysis and communication of data across supply chain partners.

By identifying risks that can throw your supply chain off course and assessing what the negative results might be, organizations are in a better position to develop proactive strategies to mitigate those impacts. Knowing what might go wrong can also aid your company in scanning the horizon for leading indicators that warn of pending trouble and can even help managers identify ways to benefit from opportunities that arise from a changing business environment. Finally, when unexpected situations arise, having conducted a thorough risk identification exercise can allow supply chain managers to promote resilience – the capacity for absorbing the impact of the disruption, quickly recovering and changing course based on lessons learned.

Nobody can think of all of the possible ways that a plan can go wrong. But by thinking about what risks might happen tomorrow, you can be more prepared to set the right plans into motion today.

References

1. https://www.motortrend.com/news/automotive-car-industry-semiconductor-chip-shortage-reasons-solution/
2. https://www.reuters.com/business/autos-transportation/us-auto-union-strike-three-detroit-three-factories-2023-09-15/
3. https://www.reuters.com/business/autos-transportation/us-says-52-million-air-bag-inflators-are-unsafe-should-be-recalled-2023-09-05/
4. https://www.etymonline.com/word/plan
5. https://www.supplychainbrain.com/blogs/1-think-tank/post/34185-how-to-avoid-the-impact-of-port-congestion-on-your-supply-chain