Supply Chains around the globe have felt the effects of Covid, shipping escalations, erratic supply and now the war in Ukraine. For supply chain planners, it is an impossible task to forecast and plan a smooth flow of goods. There are, however, some approaches that can minimise the impact of this volatility.

Getting the balance right, between too much inventory and being out of stock, is the challenge. Each industry has specific dependencies which need to be carefully considered. For example, the oil industry is traditionally quite volatile, but add in currency fluctuations on top of the Ukraine war and the supply of this precious commodity is made significantly more difficult to manage. Semiconductors is another product that has suffered huge shortages recently. Unfortunately, politics impacts supply chains forcing businesses to make excessive buying decisions that they would not normally make.

To mitigate against volatile lead times consider the following pointers.

1. Measure your supplier’s lead time performance and react to the data

Volatility has a habit of making planners overreact, buffering too much resulting in overstock positions. The worst lead time is often used in the planning cycle. The inventory holding costs of this approach are high, often created by how planners are measured. Stock holding costs should be one of the metrics that planners are held accountable for. Using statistics to create the required planning lead time based on data and confidence levels is far superior to emotively plugging in a “fat” lead time.

2. Understand your Suppliers Capabilities

Having a comprehensive understanding of your key supplier’s production capabilities, risks and performance are critical to understanding how to react to supply chain disruptions. Have a formal Supplier capability programme and use it to help make better strategic procurement decisions.

3. Win-win

Supply chains are all about relationships. If your organisation has a transactional approach to dealing with suppliers, you are likely to gain a short term cost advantage but unlikely to have support from those suppliers when things get bumpy.

4. Consistency

Supply chains thrive on a smooth, consistent flow of products to customers. Erratic processes will lead to out of stocks and too much stock. Drive for consistency, even though the lead times are slightly slower than you’d want.

5. E-Commerce fulfilment reliability

In the super quick, “I want it now” shopping world, lead time really is king. Measuring and managing last-mile lead time and promising your customers a delivery day that is very likely to occur will keep you in the game. Couriers whose operational capabilities are not carefully managed will likely have your customers feel the effects of unreliable deliveries. When selecting a courier (or courier platform), make sure you ask to see their standard operating procedures (SOPs). If they don’t have SOPs, they are likely to let you down.

Final considerations

The use of Artificial Intelligence (AI) across Supply Chains is making a real difference. With so many SKU’s to manage, people and the systems they use are unable to effectively get to each planning element without the use of some form of AI. This will become more mainstream.

An Integrated Supply Chain, driven by customer buying behaviour and demand, acknowledging each node’s capabilities, is the ultimate goal. There is no use in optimising one node. For more on this read Eli Goldratt’s book, “The Goal” in which the theory of constraints is very effectively illustrated.

Listen to the data !

Acknowledge the people element when collaborating.

Adopt a continuous improvement mindset.

BusinessChain is here to help you improve your supply chain performance.

Why not give BusinessChain a call today?

Visit www.businesschain.co.za for other interesting articles.

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