Bullwhips, Oil Prices, and Trailer Orders: Supply Chains Are in Uncharted Waters. So What's Your Plan?
Apr 22, 2020
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
If ever there was a time when companies needed to look at their supply chains and engage in some serious scenario/contingency planning, that time is now!
I bring this up because a CEO and buddy of mine took exception to last week's Two Minute Warning where I mentioned that a lot of companies are taking their supply chains for granted. Since he is a good friend I suggested we make a bet. I offered to give him a ten question supply chain "quiz". If he passed (a.k.a. got 60% or six out of ten answers correct), I'd listen to him. If he "flunked" he had to listen to me.
How did my friend do? He flunked - BIG TIME! I had his attention and we had a great discussion about why his supply chain was more vulnerable to disruptions and drastic economic consequences than he realized.
Everyone knows we're navigating in uncharted waters and mixed signals abound. And that is why I'm sharing the advice I gave to my CEO friend: Read David Simchi-Levi's outstanding article, "Three Scenarios to Guide Your Global Supply Chain Recovery" and then get together with members from you team, and consider what your future could look like.
As part of the planning process I recommended that he look at some signals we are seeing and ask: What does this mean for the future of my company? What are those signals? For example, how will historically low oil prices, a 56% drop in trailer orders, and the impact of supply chain distortions resulting from the "Bullwhip Effect" and the use of automated, trigger based fulfillment systems, impact the economy and his company?
Look, my friend is not alone. As MIT Professor David Simchi-Levi noted in his recent interview with us, when they surveyed over 600 companies, they learned that very few of them had any type of scenario/contingency planning capacity.
If you need additional encouragement to conduct scenario planning for your supply chains, we learned on our recent Breaking Down the Silos webinar (with our friends from CSCMP and NASSTRAC) that this planning process can be an extremely valuable tool in helping companies tear down the silos and find ways to work across departments. Now more than ever, you’re likely to find a willingness to unite under common goals. If you didn’t have a chance to tune in, you can still download the webinar here.
As we wrapped up our conversation, my friend said: "Mike I get the message. Where do we begin?" But that was him. What about you? Does your company have a structured scenario planning process that addresses contingencies and potential supply chain disruptions? If you'd like to have that discussion and learn where to begin in getting an outside perspective, we encourage you to get in touch and learn more about our Rapid Assessment process.