Reading about recent events like Hurricane Ike and the current Boeing strike has served as a great reminder of the human toll –  and for those of us that work in supply chain management– the supply chain and financial hardships these contingencies are capable of causing. Once a contingency like the Boeing strike hits, the cascade effect begins  and all business partners who aren’t prepared to quickly assess the impact of such an event,  and consequently, develop appropriate action plans, are at great risk.

I’ve witnessed firsthand the dichotomy that can exist between groups that are armed with tools to respond…and those who aren’t.   For example, when the partner of a major industrial supplies manufacturer went out of business, each of the manufacturer’s strategic business units (SBUs) were asked for an immediate risk assessment and to take action to limit the company’s financial exposure – this essentially meant the immediate reduction or cancellation of purchase commitments linked to the company.  The exercise to determine the risk was accomplished in a matter of hours with the use of RapidResponse (it was just a matter of creating a scenario simulation where the demands for that partner were eliminated and then subsequently assigning stranded inventory and purchase commitments to those changes).  For divisions without RapidResponse, the very same task took nearly two weeks – and during that period the financial exposure actually increased due to the delays.

In another instance, the same divisions at the same company were asked to proactively assess the impact of a potential strike at a major partner company and to develop contingency plans to minimize the company’s financial exposure.  Once again, this was a simple effort with RapidResponse, but for those without it, it was a very long and painful process with lots of risk that their analysis was flawed.

Short of a crystal ball, it’s impossible to adequately plan for a wide range of unexpected events like strikes, natural disasters and contingencies with major suppliers/customers.  And as supply chains become more globally distributed and more complex with the integration of multiple outsourcing partners, a company’s ability to respond quickly and effectively can be seriously hindered without the right tools for integrated planning, monitoring and response.  Recent events provide a valuable reminder of the importance of proactively planning for contingencies before they occur – and equally important, being able to quickly address unplanned events after the fact.  Ultimately, a company’s financial health can depend on it.

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Tags: Supply chain management
Posted in Supply chain risk management
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