What do SCM Leaders do in a Crisis?
Supply chain managers are always on the “hot seat”: Excess inventory equals obsolescence; lean inventory equals stockouts; either/or hits the bottom line. These “mini crisis” are on a daily basis and prepare the SCM crew for tougher crisis. Be it inventory, transportation, production, or planning, these folks are ready!
When it comes to supply chain risk: Lack of Visibility (“WHAT IS BEHIND CURTAIN NUMBER 2”) is the biggest danger. While high-tech and apparel industries have the best visibility, the supply chain still needs improvement across the board. It is all about those lower-tier suppliers, and even some tier 1 suppliers. If asked, a high percentage of companies have continuity plans and a dual-source strategy. My question is if this is all reactive stuff or have they addressed the unknown?
When thinking of risks and crisis, the guru is Dr. David Simchi-Levi and his Risk Exposure Index. He promotes the idea that we shouldn't necessarily focus on where we have our biggest procurement spending or where we assume our supply chain faces the biggest risk. Rather, we should focus on suppliers that would have the biggest impact on our supply chain in terms of recovery time and our bottom line.
OK you have probably heard a lot of this before. Hopefully it did not go in one ear and out the other. Now it is think out of the box time. What else can we do?
Let's start by SCM taking the lead in informing the rest of the company (and suppliers, et al too) ALL ABOUT THE SUPPLY CHAIN. Leaders can't help if they don't understand the supply chain, can they? Publish a booklet, design a video, do a road show.
The director of the supply chain needs to put the company hat on and constantly look outside the walls of SCM, uncover and fix problems before they escalate. Things like “horse meat scandals”, modern slavery, “don't ask, don't tell” situations.
Understand that not all “crisis” are about natural disasters. What about a financial crisis? How do you address shrinking customer orders, face increasing competition, and contend with decreasing margins?
Encourage transparent information at all levels; no tolorence for corruption; actively review suppliers and other partners, replace when necessary. Support your partners and employees – they will support you.
Set up early-alert systems to allow for decisive action.
Stay tuned into the news. Look at the impact of the Ukranian and Russian events on supply chains, for example.
What happens when a natural disaster takes part of our supply chain out of action? Now it boils down to continuity management. We can be very good at the tactical level (we know who to call, and the whole drill) but now we might have a strategic problem. This event could, for instance, knock out both halves of a dual-sourced product. Can you handle a contract manufacturer or Tier 2 supplier being taken out of action? Doing it wrong can put you out of business; doing it right can make you the market leader.