Will companies think differently after suffering the consequences of Eyjafjallajokull?

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There has been much written about Iceland’s Eyjafjallajökull volcano. It certainly has had a significant impact on the global supply chain. One would need a very good crystal ball to predict this unplanned event, but it certainly exposes the vulnerability of distributed networks. Here's the big question:  Will companies think differently after suffering the consequences of this natural disaster?  What will they do different? I don’t think the answer is building more just in case inventory. In order to stay competitive supply chains have to be lean. (In fact, they are becoming even leaner with late stage postponement to satisfy increasing levels of customization on consumer goods.) Here are some questions for consideration:

  1. Can you proactively analyze and understand the risk of unplanned events?  This may be the upside or downside in demand or supply disruptions. This also includes the identification of sole sourced material.
  2. Do you have the visibility and access to information in your supply network that you need? More and more companies are looking for a global view of all of their inventory with the need to rebalance as the demand and supply fluctuate
  3. Do you know what to do when you have a problem that you just can’t solve?  When a volcano happens there is not much you can do about it. The question is are you making the best use of the supply that you have? How do you want to prioritize demand and allocate your supply? How quickly are you able to make these decisions?

While there may never be another volcano that disrupts the supply chain, there are daily disruptions that affect companies every day, and that taken in sum can have a material impact to the business. How do you deal with them?  Send in your stories!

Discussions

Lorcan Sheehan
- April 30, 2010 at 7:13pm
Carol – good questions. I do think that the events of the last couple of weeks will make companies consider a broader set of scenarios in risk planning. I agree that it is unlikely that we will see a significant redesign of supply chains. With something of this scale that is (we presume) unlikely to repeat it is perhaps more important is that companies learn the discipline of how to deal with such a crisis.

The keys to success include:
- the rapid accumulation of data around the scope of the problem and the impact to customers,
- the identification of a team to consider options, make decisions and to communicate the likely impact to stakeholders and
- the definition of appropriate communication channels with customers and suppliers.

I had raised similar questions in a post earlier today on our own blog http://www.valueunchained.com
Pete
- May 06, 2010 at 5:44am
Thankfully events such as Eyjafjallajoekull are rare, but responding by assuming that “there may never be another volcano that disrupts the supply chain” is arrogant. Lean supply chain thinking is barely two decades old – it is only just out of short trousers. Eyjafjallajoekull has been around a lot longer.
http://purchasinginsight.com/volcanos-dont-do-lean/
Carol McIntosh
- May 14, 2010 at 11:35am
Lets hope that there will never be another volcano disruption but we all know that something else will take its place in the future. A little bit of time for contingency planning will pay dividends for companies as unplanned events are more the norm rather than the exception.

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