On the heels of the United Nations Paris Climate Change Conference, now seemed like an appropriate time to revisit an often talked about supply chain topic. The impact of climate change on your supply chain operations.
Tumultuous weather is perhaps the most commonly thought of supply chain risk related to Earth’s climbing temperature. Undoubtedly, the impact of wild weather is substantial. An increase in the number of devastating hurricanes, earthquakes, wildfires, floods and droughts should be worrying to everyone, not just those concerned for their supply chains. In 2014, three of the top five biggest supply chain disruptions were related to natural disasters. Typhoon Halong in Southeast Asia capped the list, causing a 41-week disruption at a cost of more than $10 billion for companies doing business in the region. Are we looking at a future where Mother Nature is responsible for the majority of disruptions?
Companies will need to evaluate the risk of losing a supplier in a specified geographic region, and whether there’s a case that needs to be made to diversify where raw materials are coming from, having multiple suppliers, and how far to take contingency plans. The same can be true for evaluating different transportation options. Severe weather can cause substantial delays, or even total shutdowns, of certain routes or modes of transportation. Supply chain managers need to have backup routes and options available and at the ready, and need to be able to quickly and effectively run scenario simulations to determine which course of action will allow for the smallest overall impact.
Another thought I had is whether these severe weather phenomenon will cause shortages of certain raw materials, like what we’re currently seeing with cocoa. What will that do to already unstable price fluctuations in some global commodity markets? Will supply chains be able to cope with the potential added costs? Can we expect to see an increase in civil unrest (and the associated supply chain challenges) as communities fight over dwindling resources? A good supply chain risk plan should take into account all of these factors.
In the current corporate climate, most companies are seeking to increase market share by flexing their supply chain to meet the needs of both the company and the customer. The question for many corporations comes back time and time again to: How can market share be retained or even post gains with on time performance? […]
Gartner recently released a new set of findings on supply chain management issues based on research they’ve done with end customers (you can purchase the research here). Among the many good insights is this: about 93% expect the pace of change will increase through 2010 (the specific question was: “Between now and 2010 do you expect […]
Top negotiators from countries around the world recently came together to form the final draft of the Paris agreement on climate change. All eyes were on the group taking part in the two-week long conference, where discussions centered on decisions crucial to the planet’s sustainability for future generations and us.
Although not enforceable at this point, it’s still a big step toward acting on this critical issue. With the stakes so high, I thought it was important to reiterate several key points and promote awareness on what individuals and businesses can do to contribute to global sustainability at a collective level.
As individuals, there are lots of things we can do to help preserve our world and reduce our own carbon footprint. A wide range of options as simple as installing a smart thermostat, to controlling food waste, driving fuel efficient or hybrid/electric cars, or taking part in ride sharing are all ways we can do our part.
For businesses though, options and impact are much larger, particularly when it comes to implantation across the entire supply chain.
With demand patterns so volatile and competition in markets so intense, there is often less chance for businesses to consider what’s best to help our world while they also focus on trying to achieve other corporate level targets.
As an example, you could have a last minute order that needs to be delivered within a short time period, or you could have a disruption that will force you to change the type of transportation you originally planned. You could even see your forecast for your new product is way lower than what the market is demanding (hopefully you are using RapidResponse for your stat forecast!). However the change occurs, you have to act fast and recognize impact before it’s too late. And you need to consider the environmental impact of that change.
Insight #4 – Embracing Supply Chain Technology as a way to change SCM
I have been following the United Nations Climate Change Conference. If you were to ask anyone what he or she thought about climate change, you would probably hear:
- Concern or Fear
I came to the realization that you would get the same reaction from a supply chain executive when discussing supply chain technology.
When I refer to supply chain technology, I am talking about software to support the fundamental supply chain business processes — Demand, Supply, Inventory Planning, and Sales and Operations Planning.
- We have electric cars, new transportation systems, wind turbines, solar panels. There is much excitement about technology favorably impacting the climate.
- Like climate change, when you hear about new supply chain and manufacturing technologies, and the advancements being made, you want to be part of the sea change. Advanced analytics, cloud solutions, cross functional collaboration, big data, in-memory computing, 3D printing. These are all advancements in supply chain that are changing the way you do business. You will be more competitive, more profitable with more market share if you embrace these advancements.
Chocolates, wine, flowers, jewelry? What will you buy for the special person in your life this Valentine’s Day? Not planning to buy anything at all? You might want to seriously rethink that decision before you show up empty-handed.
Over the years, Valentine’s Day has become big business.
As you know, Valentine’s Day is an annual holiday, celebrated on February 14. It originated as a Western Christian liturgical feast day honoring one or more early saints named Valentinus. Today, Valentine’s Day is recognized as a significant cultural and commercial celebration in many regions around the world.
Commercial celebration is right.
According to the National Retail Federation, Americans are poised to spend more than $18 billion on Valentine’s Day gifts in 2017. That comes to about $137.57 per person. I’d really love a $137.57 box of chocolates. Heck, let’s round it up to $140 and skip the sentimental greeting card.
In 2013, global aid organization Oxfam launched the Behind the Brands campaign, aimed at driving awareness about the sustainability practices of some of the world’s largest and most well-known consumer companies. Amplifying the voices of key stakeholders like farmers, consumers, and investors, the campaign called on big brands to take action to improve social and environmental standards in their supply chains.
Three years later and some of these ‘Big 10’ food and beverage companies have made significant progress, as indicated in the changes to Oxfam’s scorecard ranking, but now the push is on to ensure their suppliers actually implement these promises.
Today, I’d like to discuss distribution networks shapes. A distribution network is a channel that a company uses to get its products from the manufacturer to the end customer. The shape of this distribution network could vary from a small and simple size network to very complicated networks such as power grid network. The factors that are involved in defining the shape of the distribution network are end customer product demands, product variety, product availability, response time, returnability, and customer experience. Among these factors, response time gets higher weight in establishing the distribution shape.
Response times are the time between when a customer places an order and receives delivery. If customers can tolerate a large response time, fewer locations are required in a distribution channel and the emphasis would be on the larger capacity at each location. However, if customers require short response times then the more locations should be built in the network.
Changing the distribution network is something that a company is often reluctant to do in short range since it has direct impact on supply chain cost elements such as inventories, transportation, facilities and handling. But it is just a matter of time and sooner or later a company needs to reshape its distribution network.
As a rule of thumb we can say, the more facilities in a network, it causes more inventory costs but less shipping costs. In opposite, the less number of facilities would lead to less facility overhead cost but more transportation costs for remote customers. So if we assume the distribution costs are a summation of facility and transportation costs and call it logistic costs, then would these two elements be enough to configure the shape of the distribution network? Where would the response times fit in this equation?