Scenarios are key to managing volatility
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I read a very interesting paper by The Economist Intelligence Unit entitled “In search of clarity: Unravelling the complexities of executive decision-making.”
The article included a discussion on the virtues-and limitations-of scenario-building in the context of executive decision-making. A couple of comments that I found very interesting:
- “Another benefit of using scenarios is that they combine human intuition and hard analysis, two elements which are the bedrock of all good decision-making”
- “Scenarios do not make the decisions; rather they provide a common intellectual background against which choices can be discussed, tested and agreed”
- “In turbulent times, people are looking for ‘flexibility and resilience’ in strategy to meet rapid change–something which scenario-building can be designed to address”
Great observations. As I’ve commented in the past, every company needs a plan - it serves as the foundation of all actions and provides specific goals and objectives. But the reality today is that the plan is a set of guidelines. Increasingly, things are changing so rapidly that manufacturers need to combine demand-supply planning with monitoring and collaborative response capabilities to deal with the pace of change.
The collaborative response capabilities must embrace human judgment–using tools such as scenarios–to figure out how to deal with the realities as they unfold, since reality is increasingly not what was in the plan.
For years companies have been conditioned to focus on supply chain planning and supply chain execution. If you could do this better than anyone else, you won the supply chain management game. But that’s no longer sufficient. We’ve entered a new era of surprise and compromise that needs to be supported by a new set of tools designed specifically for this new reality. Traditional demand planning and supply chain planning systems have failed us in this new reality.
The appropriate scenario management capabilities into the hands of the key people within the supply chain management function can provide breakthroughs in dealing with today’s new era of uncertainty.
