2010 Supply Chain Resolutions

The dawning of a new year always inspires people to set resolutions to transform themselves, their businesses, and work ethics. We are glad to have 2009 behind us. It was a tough year though the second half showed some glimmers of recovery. As we begin 2010, what are the kinds of resolutions supply chain professionals should consider? Consider the following from our perspective at Cadent Resources Group.

Be Optimistic: Many of New Year blogs and postings we have read suggest that we should all be optimistic. The recovery is in progress per the key indicators. We should be invigorated having survived 2009 and aggressively embrace 2010, ready to support our organizations with the best Supply Chain we can deliver.

Be Cautiously Optimistic: Though we have reasons to be optimistic, we also understand that the next year or two will be one of the most challenging in supply chain management.

• The last few months have shown that historical data is no longer a valid basis to assess seasonality, trend, and understand product mixes. Unpredictability is the new normal. This makes setting of stock requirements very difficult further magnifying the need to reduce cumulative lead times and elevate communication from customers to suppliers.


• Pre-recession companies utilized more automated inventory policy setting and “letting the system do the work”. Post recession into the recovery, companies must adopt a more frequent review and policy setting process. This is difficult in standard ERP systems. Supplemental systems should be sought to efficiently review data, trends, and changes in mix.


• What will happen to fuel costs as the global economy moves from a simmer to boil? How will this affect transportation costs and supply chain designs. We still remember how bad it got in 2008.

Know the Physics of Your Supply Chain: A wise supply chain colleague once stated “know your numbers.”

• We need to know the lead times for all of the components of the supply chain. The longer the lead times i.e. products and materials from Asia, the more critical this is. Reaction time to a rapid recovery is limited by long times. Likewise, if the recovery is not robust, long lead times will limit our ability to trim inventories to their proper size.


• Pay attention to the mix. If we have a robust recovery, how will the sales mix change? What will be the hot sellers? Will they be the same ones as in 2008? Will they be new value products? Forecasting aggregate sales may be easier than the mix.


• As business begins to pick-up, traffic in various lanes both international and domestic will begin to change. You may have to re-negotiate rates either to maintain capacity in lane where demand has increased or too reap savings if the lane somehow becomes less important.


• Most supply chains organizations have reduced headcounts. What are your plans should a recovery come for both exempt and non-exempt employees? A temp-to-hire approach may be the best approach to ensure you are getting the best people possible.


• Ensure that the data in your ERP reflects the actual lead times, costs, capacities, etc. of your current supply chain. Wrong information will limit your ability to effectively act and react.

Constantly communicate the capabilities & trade-offs of your Supply Chain: Knowing your numbers, the Physics of your Supply Chain is not enough. You must communicate these capabilities and trade-offs in every management meeting you participate in. The entire management has to know the plusses and minuses of decisions that are made by the team. No one should be “surprised” by the possible consequences of forecasting and business planning geared towards cautious optimization or anticipating a robust recovery.

Fasten your seatbelts! The recovery period supply chain will be nothing like the pre-recession supply chain.

Best wishes for a successful 2010!

Ara Surenian and Mark Gavoor

Comments

[Gloria Rubaine]

Good comment and easy to read. The ability to be flexible and know your own data is key to being able to adjust the supply chain to meet the upswings and downturns of the economomy. Most articles I've read in the past week seem to just lecture.