We had a good discussion with the folks at Gartner the other day.  During the call, we were comparing notes on the current economy and the impact it’s having on manufacturing and supply chain management.  We were relating that to the current state of a typical supply chain and how increasingly complex they have become.

One of the analysts from Gartner then made the observation, and I’m paraphrasing, that you can never engineer out of a global supply chain all of the problems that could occur.  So, the real challenge is how do you ensure that your supply chain staff have the right tools to do the right thing when these unavoidable problems materialize?

I thought that was a great observation as it is precisely the challenge we see most manufacturers dealing with.  For instance, companies are working hard to improve their sales & operations planning (S&OP) process, yet once “the meeting” is done, they then have to deal with the reality that the assumptions that went into forming the plan often don’t play out the way they predicted.  This macro-trend plays out across the organization.  If you’re on the demand planning/demand management side, you inevitably find (more so now than ever) that your forecast isn’t accurate and you’re struggling to get finished goods to the right place at the right time.  If you’re on the supply management side, you too are finding that it’s increasingly hard to deliver to the supply plan you’ve created, especially when you’re fighting fires all the time because the actual demand you have to deliver to isn’t what was in the plan.

There’s a lot of investment that companies make in trying to engineer all of the problems out a global supply chain.  Strategies like lean six sigma, kaizen, etc. are all worthy investments and it clearly pays to reduce as much waste and engineer out as many problems as possible.  But, I think companies do themselves a dis-service when they don’t explicitly acknowledge that you can’t engineer all problems out a global supply chain and, thus, invest in solutions for this very different type of problem.

Engineering problems out is about process automation, where it actually is beneficial to remove people from the equation in many cases and have systems help automate these functions.  Where things are predictable and you have a static set of assumptions, this is a viable approach.  But, dealing with the problems that you can’t engineer out is a different type of problem.  To adequately manage these, you need to engage people – because it is people that truly understand the right course corrections to make.  Armed with the proper degree of supply chain visibility and tools for collective risk tradeoff and response, people must be actively engaged to collaboratively determine the right actions to take in these situations.

While many manufacturers today invest all of their energy in trying to engineer problems out of their global supply chains, there’s a differentiating opportunity in recognizing and dealing with the fact that you just can’t do this fully.

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Posted in Response Management, Supply chain management
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