How to Deal with Uncertainty

According to a recent Tompkins Supply Chain Consortium survey of logistics executives from a variety of industries, business uncertainty has had a major impact on their supply chains. The effects boil down to four:

1. Added cost;
2. Increased inventory levels;
3. Increased lead-times; and
4. Reduced speed to market.

Not understanding the past and present reduces the ability to predict the future for supply chain practices, explained a recently published executive briefing from Tompkins. This adds steps and time to the process, and equates to higher costs. Inventory levels and lead-times are increased to cover for the uncertainty of demand. Speed to market is impacted by increased inventory and the ability to make quick decisions about what products to put where in order to optimize efficiency and customer requirements.

As part of the survey, participants were asked to describe how they are dealing with uncertainty in their supply chains. The following list captures some of their responses.

• Have focused, small teams of the right people to drive closure and minimize the risk;

• Work to become proactive and agile by improving planning systems and reduce cycle times;

• Try to balance network design, customer demand volatility, and customer satisfaction;

•Increase focus on planning, operational excellence, technology implementation, and collaboration;

• Improve the recognition of risk profiles and build contingency planning capabilities;

• Develop and implement a risk management strategy and monitor the condition of the supply chain regularly;

• Work on backup suppliers and freight companies to reduce supply risk/uncertainty;

• Focus on supplier development, near-shoring strategy; lean and partnership;

Specific solutions or innovations respondents cited to reduce uncertainty across the supply chain include expanded use of ERP data and capabilities as well as updating and implementing software tools and techniques such as warehouse management systems, transportation management systems, supplier relationship management, and software as a service.

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