2010: the only sure thing is volatility

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I was reading the article: “2010-Risk or Opportunity?” on SupplyChainBrain.com and it got me thinking about 2010 and the author, Mark Woodward’s comments. The first topic the author discusses is “Multi-Tier Functionality”.  As more and more manufacturing operations are outsourced it is difficult for a company to have any control over their supply chain because they lack data.  I agree with the author that this becomes an imperative in 2010.  The economy is showing signs of improving however, all of the companies I speak with say the only sure thing is volatility.  No one really knows how the business will be so they will need to be able to react and make decisions very quickly up and down the supply chain.  This requires not only visibility into the supply chain data from suppliers, but the ability to simulate changes in demand and supply to determine how best to make business decisions based on fluctuations in a company’s business.  Ideally, the customer would have the ability to explode the full BOM to be able to make decisions at any level. As the author states there needs to be a focus on relationship building.  The article talks about the relationships between trading partners and brand owners becoming true partners.  I absolutely agree. Having visibility into data and the brand owner being able to make better business decisions should help the brand owner make better business decisions about what they need from the trading partner and hopefully improve the trading partner’s business as well.  The customers I work with who do this well are able to create many different types of scenarios the simulate changes in demand which allow both parties to keep the lowest amount of inventory and lower their costs. In addition, I think the brand owners need to focus on the relationships with their customers (as the author states).  Manufacturing companies I talk to are very worried about any significant change in their relationship with their biggest customers.  Typically, the biggest customers not only comprise a large portion of a company’s revenue, they also can be the engine for a company to acquire new customers.  If a top company in a field is using someone, then smaller companies in the same field may want to use that company as well.  So, the ability to collaborate with your biggest customers through a portal, VMI or just sharing data can be critical.  These relationships are also important in the sales and operations planning function for a company.  The best way to have true visibility to demand is a good customer relationship.  I do believe in this volatile market that sales and operations planning for a company will be key to their success in 2010 and good relationships and collaboration will be key. All in all, 2010 is going to be an unpredictable year for manufacturers and the more visibility companies have in their supply chains, the more they can simulate changes in demand and supply, the better relationships they keep, the better off they will perform next year.  It will be interesting a year from now to see if the best performing manufacturing companies have implemented some of these capabilities.  Happy New Year!

Discussions

Al Godley
- January 05, 2010 at 11:08pm
Volatility is always with us. I know of a company that every year tells its employees that "we just have to make it through this year, make out budget and we'll be fine". The problem is that every year is the same and it is always true. But it is still crying wolf. Look at it reasonably.

The same can and should be said about supply chain. Volatility is always with us. In bad times it is because of overall or uncertain demand. In good times it can be from competitive products flooding the market to get part of the action.

The the main point is collaboration. Know your customers, know your customers customers, know the market and know your supply chain. And be sure they all know you. Encourage discussion, sharing and input up and down the channel. Pay attention to what is going on, look for those initial signals from the market and have a plan to react. Those signals can be critical. Data is not the answer, information is the answer. If you are long on data but short on information, look for answers to this problem.

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