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S&OP quite often the wrong horse

Marieke — Mon, 30 Jan 2012 07:36:25 +0000

You won’t have missed it: S&OP is a trending topic. There’s no escaping it. If you’re not in, then you’re out! Right? Well, I would be the last person to deny that effective S&OP is essential to successful business. The question, however, is whether you are ready for it. Does your company meet the conditions of effective S&OP?

Preventing surprises
Regularly I come across companies where grip on the primary process leaves is lacking. Customer delivery reliability is far from perfect, while inventories are still increasing and Operations works overtime. Meanwhile Operations reproaches Sales with an unreliable forecast, while Sales in her turn accuses Operations of being unreliable and rigid. In short, not a very constructive situation. Then the escape to S&OP is made easily. For in her simplest form S&OP promises to prevent such surprises by monthly coordination between Sales and Operations. A safe bet, isn’t it?

Life is what happens while you’re busy planning
Sometimes it is. But not always. Experience teaches us that regularly the primary process actually appears to be out of control. In one case the push/pull point has been chosen unfortunately. In another case the bottleneck lacks a time buffer or demand variation is admitted to production unfiltered or even amplified, thanks to our much trusted supply models. More control, for example by means of S&OP, irrevocably leads to disappointing results in such cases. For you cannot control a process which is out of control. To be able to control a process it first has to be controllable.

Ferrari in reverse
Imagine enterprising as a winding mountain road and your company as a Ferrari in reverse. You have two options: 1. a passenger to inform you of coming bends or 2. first to turn the Ferrari in the right direction. No doubt you will choose option 2. In reality, however, many organisations will choose option 1. They leave the existing “out of control” process undisturbed and choose extra control. Instead of reviewing their control concept they choose S&OP. That way they bet on the wrong horse with disappointing consequences.

Control first
S&OP may have proven itself to be an essential part of successful enterprising, but before you give in to it, it is worth the trouble of wondering whether your company meets the conditions of effective S&OP. In other words: is your primary process controllable and are the symptoms mentioned in the second paragraph unknown to your? If so, put all your stakes at S&OP. If not, make sure that your primary process is truly controllable before you try to control it.

Alex Tjalsma is partner with Involvation, supply chain consultancy

The tools for Integrated Business Planning

Martijn Lofvers — Fri, 27 Jan 2012 15:17:43 +0000

Lean supply chains became a reality for some organisations during the economic downturn; not through increased efficiency, but through panic as they drained inventory to cut costs. These same organisations now face the challenge of restoring the performance required to maintain customer service levels.

Previously organisations might have been sent scrambling for an IT solution to the problem, but at Oliver Wight we’ve seen an increasingly widespread acknowledgement that the tools on their own haven’t been delivering the type, size and performance of business organisations wanted, and now investment in people and process has become more of a focus. Rather than spend £5 million on a new IT system, organisations are choosing to invest five to 10 per cent of that figure in people and process instead, and they’re getting substantially better results.

Evolving tools
IT tools do, of course, continue to support processes, and you can still expect IT to help, rather than hinder, improvement action. The merits of these tools have not fundamentally changed; it is how they are being used, which we are seeing evolve. Organisations need information to drive their business management processes and consequently they want reliable and trusted information rather than just data from their systems. As a result, IT suppliers are having to adapt and develop their solutions to provide this support in line with process and people.

Advanced Sales & Operations Planning (otherwise known as Integrated Business Planning) is a particular area of focus. As well as allowing organisations to gain greater control over their own business processes (with resultant efficiency and financial gains), Integrated Business Planning (IBP) extends the principles of S&OP into the extended supply chain. There have been IT solutions for some time, which support S&OP but some (Oracle and JDA are two examples) are now making the leap to IBP. Oliver Wight has been developing the processes, structures and behaviours required by IBP and there has been learning on both the IT and process side, so the two can be fully integrated.

Over the years conventional S&OP has typically been assigned as a supply chain process, balancing supply and demand over a one- to 12-month horizon, with no product management or financial integration; the focus is on tactical decisions in the short term and on the numbers, rather than the issues. IBP on the other hand brings with it a truly strategic perspective, integrating all the elements of strategic planning, product management, customer demand and full supply chain planning into one seamless management process. Led by the executive team, IBP is designed for effective decision-making. It allows senior management to plan and manage the entire organisation over a 24 month horizon or more, aligning strategic and tactical plans each month, and allocating critical resources – people, equipment, inventory, materials, time and money – to satisfy customers in the most profitable way.

Close gaps
IT alone was always insufficient at restoring efficiency in a lean supply chain. Now, aligned with the people and processes, IT can deliver the tools required to implement an effective IBP process; providing visibility of financial and operational planning, supporting a robust rolling plan, and allowing the modelling of different scenarios which emerge from the IBP process to aid rapid and effective decision making. Long- and short-range operational plans can be viewed against financial forecasts to identify gaps. Scenarios can be assessed to close gaps, and ensure goals are met. The modular tool-set that some IT suppliers provide span the evaluation of resources and demand for new products, determining total demand and planning supply across multiple tiers of suppliers.

Steve Rowntree, Associate at Oliver Wight
ww.oliverwight.com

Acting like Napoleon

Martijn Lofvers — Fri, 27 Jan 2012 15:04:52 +0000

Napoleon Bonaparte is widely regarded as one of the greatest generals in history. Many point to his victories at Austerlitz, Wagram, Ulm and Jena as great case studies of his strategic acumen. But what made Napoleon so successful in his craft? One could argue such innovations as the self-contained military corps gave Napoleon a great advantage over his opponents. Why? Because these corps could maneuver and react faster than their opponents – be more responsive on the battlefield to changing events. How does this relate to the extended supply chain of the modern enterprise? The lessons in flexibility and responsiveness are vital to enterprises being more responsive to the constantly changing stream of events that impact the supply chain.

The enemy
What Napoleon understood, was that no plan survives the first contact with the enemy, but the speed at which you can identify out of plan events, understand how they will impact your ability to achieve your end game and what course of action you can take to ensure you still achieve your goals is what brings you a greater success rate than your competitor.

Supply chains today are stretched, that is not a news a flash. With extensive off shoring, with the desire to run lean, with the constant pressure to wring out any amount of waste you also have a supply chain much more sensitive to any disruptive events. Event to events that appear are trivial on a global scale. Today’s supply chains must have the ability to shorten the time it takes to identify a potentially disruptive event, understanding how it will impact the extended supply chain and then how to best take corrective action.

So is this a new concept? Not exactly. Businesses and supply chains are like generals, as Napoleon demonstrated. They are all striving for the ability to more rapidly sense events, understand their potential impact and then take action. The issue is more about adoption and ability to actually address these needs with technology.

The puzzle
About a decade ago, we thought that the ability to optimize and create highly tuned plans would allow supply chains to perform at an optimal level. We could model for any occurrence, leverage mass quantities of historical information and connect all our systems to produce a well-tuned operation. Technological advances gave us the promise of highly sophisticated and accurate planning. Of course we learned that this approach was not without flaws, while planning continues to have a seat at the supply chain table it is only a part of the puzzle. Then came the wave of striving for better execution, simply stated we wanted to ensure our inventory moved through the supply chain as smoothly and efficiently as possible. Whether that meant better transportation or warehousing, improved factory production or optimized execution at the store shelf level, the promise of better execution became the path to greater supply chain performance.

Yet, like Napoleon, the reality is that supply chains must take all these into consideration and add another element – the ability shrink the time between seeing a disruptive event and changing your course of action to either rectify the situation or seize new opportunity before your competitor. We could “plan” well, we could “do” efficiently, now we need to improve our abilities to “check” “understand” and “act.”

End-to-end visibility
This is where solutions like Business Process Management (BPM), Complex Event processing (CEP) and RPM (Responsive Process Management) fit into the equation. With the ability to leverage events, transactions and processes under one umbrella supply chains can achieve rapid respond and react to events. Of course what supply chains need first, is better visibility into the entire process to detect problems as well as opportunities in real-time –the capability to “check” on the extended supply chain. This process is complicated due to the number of systems required to manage your business. No enterprise is a one-stop shop when it comes to their technology infrastructure. Even companies that claim they are a, “choose a vendor name,” shop, they have different instances of that software and will most likely have legacy, home grown or an other vendor’s applications somewhere in their extended enterprise. If you wanted seamless end-to-end visibility you could take out all these instances and different systems and turn to one provider…but that is not reality. Nor is it wise to think you have the time or treasure to do so, the systems these companies have been leveraging have been functioning effectively at some degree. What allows these enterprises to take their business to the next level is finding a way to gain visibility, while maintaining their existing infrastructure.

But visibility is only the first step. What good is seeing events in real time if you cannot understand how these events impact your business? One needs to grasp how these events are impacting your business in the present, not ex posto factor. Therefore it is important to have what is a short window correlation. For example, when you have thousands of events occurring every second you cannot afford to wait until you have collected, mined and analyzed all that information. What information or impacts you might glean from the analysis might no longer be actionable or worse, the events could have led to other unintended consequences. We need to “understand” how the events we have observed will impact our business.

Ability to act
Finally to stay competitive, an enterprise needs to reduce their reaction time to an out of plan event. Even better if the enterprise can anticipate the occurrence and take corrective action before it is too late – the ability to “act”. An ability to correlate events and potential outcomes in the moment is vital to making the visibility actionable. Which is our third requirement – action.

Seeing what is happening in real time is important, and being able to correlate how these events will impact the enterprise is another necessary attribute. However, the ability to take action when necessary is critical – and that is what makes RPM the most powerful solution for the supply chain professional. Now, enterprises can see, understand and act on events as they are happening in real time.

This brings us back to Napoleon. His genius was rooted in his uncanny ability to read a situation, calculate potential results in the midst of battle and then take action to correct his strategy or take advantage of an unexpected opportunity. With the right solutions, businesses and supply chains can do the same.

Guy Courtin, Industry Marketing Manager Supply Chain at Progress Software

The safety stock formula to cure a sore knee

Martijn Lofvers — Fri, 27 Jan 2012 14:52:26 +0000

Take 2 tablets a day, my aunt Mary told me. She is a doctor. Although I did not know that until last month. In fact, it was not until recently when I damaged my knee that I realised that everyone in my family was actually a trained medical expert. No sooner had they seen me limping that they each insisted I use their miracle cream or take one of their rheumatoid tablets. Even my 15-year old niece was giving me advice to cure my pain. She had seen her grand-mother do these knee exercises, so surely it would work for me too.

I was touched because I knew that they were all trying to help me get better. Most of all, they all believed in the specific treatment they were recommending because it had worked for them in the past. I guess the only difference between them and the real doctor, was that they never actually examined my knee to find out what was wrong with it! Which leads me to this month’s dilemma: which safety stock formula is the right one for your business?

If you read the relevant white papers, you will be baffled by how many different formulae exist to calculate safety stock levels. Some look quite similar with just a square root added or removed. Others feature more unusual factors and components. And if you ask the expert behind any particular method, he will tell you with much enthusiasm that his is the best one to cure your sore knee – sorry, I mean to calculate your safety stock.

One of our clients recently decided to test out 6 formulae. Half of those were eliminated straight away because they could not understand them. They eventually chose a hybrid of two of the methods. We had encouraged them to think about the reasons why they needed safety stock. Was it about the lack of forecast accuracy? Was it to compensate for poor production performance? Was it to cover for an unreliable supplier?

To find the formula that works for you, my advice is to keep it simple. Make sure that you understand it and that its components match your need for buffering. Otherwise, you will never trust its results and you will struggle to defend it if colleagues start to question its validity. By the way, my knee is much better, thank you. But I have no idea which cream or pill was the one that really helped…

Alain Vix is Account Director at Supply Chain Planning specialist Hughenden Consulting
www.HughendenConsulting.com

Don’t forget your silos

Marieke — Wed, 25 Jan 2012 13:17:43 +0000

Departments frequently seem to operate within their own silos, and this can limit the sharing of information. The implementation of an integrated IT system is often seen as the way to advance the organisation. Unfortunately during the implementation process of such systems, the extent to which the departments are internally focussed is still often underestimated. Ambition turns into overconfidence, which I believe is one of the factors that lead to the dramatically low success rate of large IT projects. So, when I recently learned about a successful implementation, I wanted to know more about its background.

Incremental functionality strategy

While attending an event in September I ran into a former classmate from Nyenrode Business University, Eduard de Vries. Eduard is Senior IT Manager for IDEXX, market leader in diagnostics and IT solutions for animal health and water and milk quality. IDEXX operates its reference laboratories division from about sixty locations worldwide and discovered that the IT environment was inefficient. A series of takeovers had resulted in a patchwork of organisations and systems, and the company decided to start an ambitious project to implement a new integrated global system.

Based in Boston on of Eduard’s responsibilities is to lead this project. The implementation is successful; the global rollout is progressing from country to country. This project is not only considered a significant catalyst creating improved productivity, but a greater amount of information available as a result means that IDEXX can offer its clients much better service. Remarkably, the rollout of this project is even on the agendas of analysts who follow the company. It is often discussed during analysts’ meetings, with positive reference made to it. According to Eduard, part of its success is not so much the complete elimination of the differences between the departments involved, but more a simple acknowledgement of these differences. Success can only be achieved if all the system’s users accept and embrace changes.

Eduard and his team have applied an incremental functionality strategy. The aim here is not to identify and describe all the possible functionalities beforehand. The team focuses on the needs of the country in which implementation is taking place by applying an incremental functionality strategy. In this way, the existing organisation and processes are encompassed by the team, ensuring that original functionality is retained. Then, the team sets itself a target of two or three major wins. If one of more of these wins is new to the project, it is immediately implemented in the countries where the application is already running. Thus, as the system expands, standardization takes place naturally. This process also forms an excellent basis by which to constantly improve and update the strategy.

IDEXX’s operations are changing so quickly that long-term implementation plans can sometimes no longer be relevant. The chosen approach forms the basis for acceptance amongst shareholders, management and users while, at the same time, acting as a stepping-stone towards future integration and improvement. This is how Eduard keeps everyone on board during the course of this long-term project, while achieving repeated success.

Don’t forget your silos

Does using an incremental approach imply that Eduard has set a low ambition level? On the contrary! But he is determined to set realistic goals. In large and complex organisations, it is an enormous challenge to make a global project a success. Calls for ‘disruptive’ changes often result in unrealistically high expectations that a company simply cannot stay abreast of.

Greg Smith, Transportation and Logistics Industry Director at Oracle, has his own take on this matter: ‘Silos aren’t that bad, they’ve brought us to where we are now.’ In other words, remember how a company got to where it is today. It got there with the help of its silos, IT systems and employees. If you don’t acknowledge this then you actually disregard the present-day organisation. This is the wrong way by which to gain acceptance and will be fatal to ambitious plans as well as damaging to an organisation.

Eduard has recognised this fact and applies this knowledge without being less ambitious. If silos are completely demolished during the course of a project, an organisation might collapse. Start by installing some windows and doors and people might find their own way out.

Jeroen Bolt is interim manager and consultant at Bolt Consultancy

Show us your talent!

Martijn Lofvers — Wed, 21 Dec 2011 10:36:40 +0000

The atmosphere is tense. Tears are flowing. Heart rates are racing. Weeks of adrenaline-pumping moments are coming to a head. This is it. The excitement of the judges and contestants can barely be contained. And the winner of the 2011 “I’m a celebrity and I have lost my X Factor so come dance with me” contest is…

Whichever talent show grabbed your attention this season, we are all led to believe that a new superstar is born or that an ex-celebrity’s career has been given a fresh boost. Someone’s life has been changed forever. Or has it? Was this period of television frenzy really the ultimate competition or is the real test still to come? The powerful showbiz whirlwind might well transform the winner into all sorts of delicious money-making dishes. Or it might just mince it into tiny pieces of meat served on a sheet of tabloid newspaper.

Which leads me to this month’s subject. Is the recession really the ultimate test for your supply chain or is the real challenge still to come? Your finance director might think that the situation is as tough as ever, but what about your customers? For months, you have all focussed on reducing inventories – and quite rightly so. Without the continued actions to control the input into your supply chain, rationalise the product portfolio and revise the dynamic safety buffers, the sales slow-down could translate into dangerously high levels of stock across the business, tying up the cash you are going to need. Everyone has been working hard to minimise the impact and manage the circumstances. Yet the real test for your skills, processes and decisions is yet to come. At the other end of the tunnel, the increase in demand could take you by surprise.

Yes, boom will follow bust as surely as day follows night. Except no one can predict whether it will happen at 06:34 tomorrow morning or in 18 months time. So when the tills start ringing again, how will your availability and service level cope or will your customers spend their money elsewhere? We all caught a glimpse of this struggle during the false start in 2010 when supply chains were empty and lead-times were measured in light years. For now, keep focussed on whatever the market trend is doing. Make sure that, when the time comes, the ramp up of supply demonstrates that your processes are truly responsive. And smile for the camera…

Alain Vix is Account Director at Supply Chain Planning specialist Hughenden Consulting
www.HughendenConsulting.com

S&OP Asian style

Marieke — Wed, 23 Nov 2011 15:57:53 +0000

“It’s two minutes to twelve, and we continue navel gazing!” said one of the participants during the S&OP mini-seminar recently held at ArlaFoods in Nijkerk. Just before Lourens Schouwink, CFO Samsung Benelux, had talked about their ambitions and approach. Leaving part of his audience behind in wonder and despair.
Samsung continues on the warpath. After a climb to the market leader position in the last decade for products like side-by-side refrigerators, flat-screen televisions and mobile phones, they now are aiming for leadership in green technology and health care. And if Samsung wants something, they’re going to get it. Lourens Schouwinks’s presentation didn’t show any hesitation or doubt.. Arrogant? Maybe. Self-conscious? Sure. Complacency? Not at all..

How to eat an elephant?
It goes without saying that you will be adrift without a vision. Until recently that was also true for the road to success: in small manageable steps. Or as Oger Lusink, Dutch fashion king, said recently when asked for the key to his success: “Think big, act small”. Samsung seems to belie this theory, however. Samsung chases after it’s goals in giant leaps..

Big Man
Think big, act small. The question is: what is small? For my grandmother Sneek was the big city. When you’re from Seoul, Amsterdam is just a village. Size is relative. If you’re small then you have to deal with small steps. If you’re tall then you can make giant leaps. Or as Confucius put it, “Man with head in the cloud can not have feet on ground ….. unless very big man.” Apparently Samsung is such a very big man. Making giant leaps doesn’t seem to bother Samsung.
An interesting question is how to become a very big man.

Pali pali
Schouwink contributes Samsung’s success to the Korean national character. The term “pali pali ‘, or ‘quick quick’, refers to the Korean national character. “We drive fast, eat fast, do everything fast – we are always in a hurry.” Koreans do not have change management workshops or “away days” to create urgency. Urgency is apparent; always and everywhere. Anyone who has taken a taxi in Seoul will agree. They drive like crazy!

The same urgency is also reflected in the way Samsung is managed. Top-down targets are determined and imposed. Leadership ‘does not take no for an answer’. What’s left for sales and operations is the execution to achieve the targets. No consensus but confirmation. No polishing of forecasts, but closing the gap between forecast and targets with concrete actions. There is simply no room for sandbagging. Of course, all this is done fully compliant with the national character, in unison in the pali pali way.
The result is a tremendous jumping power. And if you have jumping power, you can make giant leaps. For spectators unbelievably huge, for Samsung small enough to be feasible.

S&OP mindset
Samsung proves: successful S&OP is not a process, S&OP is a mindset. Sales and Operations to work together is an open door. Whether it happens depends on the commitment to jointly achieve the targets. Urgency is a prerequisite. Meetings, agendas, action lists and IT are only tools, a means to an end. Or as Erik Brouwer, Director SCM Northwestern Europe at Perfetti Van Melle, put it: “Why are we complicating things? Tear down the walls and focus yourself on the essence, the shortest path to the goal.”

According to the reaction of Schouwink’s audience, we definitely need some pali pali here in Western Europe. Sooner rather than later. As for me, without the crazy driving.

Alex Tjalsma is partner with Involvation, supply chain consultancy

The impact of company culture on IBP part II: Change

Fast food or slow food in your planning?

Martijn Lofvers — Tue, 01 Nov 2011 10:27:43 +0000

Since the growth of the obesity problems, lots of attention has been given to the slow food movement. The substantial growth of fast food has contributed a lot to obesity problems in developed countries. The same fastfood is new doing the same in emerging markets such as China and Nigeria, where obese childrens are one of the largest public health concerns. Enabled by a free market, fast logistics, and extensive marketing, fast food is outpacing the traditional slow (and more healthy) food.

Reading about this I could not help thinking about the advent of so-called “real-time planning” in supply chain management. Since already more than 5 years, the real-time phenomenon has gained ground in selling (advanced) planning software. Nowadays, with the presence of internet-enabled cell phones and social media, I expect that we will soon see a pacing up of selling effort. Being used to instantenous messaging and status updates, it is fairly easy for a marketer to tap into this feeling by jumping on the real-time planning bandwagon.

While real-time information sharing is not necessarily bad – at least it can provide a planner with a comfortable feeling that he has some information – real-time planning could actually be bad. As many of you know from playing the beer distribution game, forecast updating is one of the main contributors to the bullwhip effect. Essentially the mechanics boil down to updating more frequently than the system is able to respond. And actual responses take much longer than people think. Having outsourced manufacturing and a service level agreement that guarantees delivery within two weeks hides any potential delays further upstream the supply chain. Actual responses may therefore be much longer than your SLA suggests, especially in times of crisis. Our research shows that building in deliberate and well-designed slack into your planning mechanism eventually leads to a better performance. Some extra inventory here and there, some slack in your lead time, or some unused capacity may look bad on paper, but effectively this allows you to slow down your responses and create a balanced supply chain.

Real-time planning may lead to unanticipated obesity, while slow planning will keep you eventually much leaner.

Jan Fransoo, Professor at Eindhoven University of Technology, Faculty of Industrial Engineering and Innovation Sciences and Board Member of the European Supply Chain Forum.

Lean with more stock

Marieke — Mon, 31 Oct 2011 14:30:09 +0000

Recently I was invited by a production company in the south of The Netherlands. The reason was chronic lack of grip on the production process. This was far from a new problem. However, increasing pressure on cost and reliability, forced the plant manager to take action soon. All efforts to date, including attempts to introduce Lean and Six Sigma, had offered little or no relief. After a tour and some preliminary discussions, we agreed to return a little later to simulate the situation with a number of key players.

That same week we returned with little more than a sheet of graph paper and a pair of dice. The graph paper represented the assembly line; with the dice we determined the demand for different products. It soon became clear that production to order (PtO) is not an option in this situation. The capacity simply fell short to follow the demand variation. Production to stock (PtS) seemed to work a lot better. After all, the service level skyrocketed. The disadvantage was, of course, the increased inventory level. Moreover, and this was an eye opener, the demand for capacity still appeared very irregular, despite the newly constructed finished product inventory.

While playing, the effects soon became obvious. Lack of control, disappointing utilization rates, long and unreliable lead times. Very recognizable symptoms for people around the table. The cause was soon clear: the randomness with which assembly orders for individual items were generated. One day there were no assembly orders. One day later too many. Just like in real life.

Fruitless search
Now the reason for the lack of grip was known, the obvious question was how to avoid abrupt demand for capacity to continue to make the process unmanageable. The team understood that the answer to that question would be the key to recover grip on the production process. Both in the game and in their factory. An awkward silence followed.

When after some time the commercial manager suggested to add finished goods inventory, his colleagues immediately redirected his idea into the garbage bin. “More stock does conflict with lean-thinking ‘, was the convincing argument. The search for solutions was prosecuted.

More stock
This search remained fruitless, until the commercial manager had regained his courage and asked again for more stock to level the demand variation; to produce more if it was quiet, less if it was busy. Nothing to lose, the team decided despite previous objections to give it a try. Totally against the convention and their own logic, the team ultimately decided not to reduce but add inventory, albeit in the right place.

That appeared to work. And how! Grip was repaired with a continuous occupation and reliable lead times as well. Pretty much lean therefore. To their surprise they found the extra inventory to protect the plant against the harmful effects of demand variability. The benefits were clearly demonstrated. Now the game was conquered, the team was full of ideas and inspiration for recover grip on their own process.

Isn’t it great? Who would have thought that a simple game could turn this team to finally leave the beaten path and to break existing conventions, to think and do different. Unfortunately, in practice we all too often stuck in old misconceptions and faltering logic. Fancy a little game?

Alex Tjalsma is partner with Involvation, supply chain consultancy

Natural risk behaviour

Martijn Lofvers — Fri, 21 Oct 2011 09:31:32 +0000

What is the company behaviour to risk and danger? Natural disasters in last years have made companies more and more aware of supply chain risks. The earthquake and the following tsunami in Japan made clear where risks of supply of components especially in the high-tech industry lays. A company needs to know that when a natural disasters occurs if it hurts their supply chain. Upstream supply chain visibility is a definite requirement to know where vulnerabilities lay.

According to a recent survey by Garter analysts supplier visibility focuses on reducing business risk and the need better for lead times. But there is a difference between supply chain status information from a company’s direct suppliers (Tier 1) and from Tier 2 and Tier 3 suppliers. Supplier engineering and quality-related events doubled the need for status information at Tier2/Tier 3 compared to Tier1 suppliers. Additionally, Gartner sees government legislation and regulation increasing more upstream for the “secure” supply chain , which will drive the need for additional upstream visibility and control in some industries, including medical, aerospace and defence and high-tech.

Companies that seek Tier2/Tier3 data do so to get “early warnings” on upstream engineering and quality issues before they impact Tier 1 and brand owner manufacturing processes. Approximately 70% of the researched companies by Gartner are getting Tier 1 visibility with shipment and order status. Of these companies only 30% have the same kind of visibility on Tier2/Tier3 level.

The main question to me remains how companies (re)act to critical information upstream. In nature animals behave differently in the matter of awareness of danger en responsiveness to it. An ostrich and an elephant are highly aware of risk, but behave differently. An elephant charges in times of eminent danger, just like most chemical companies when safety is at risk. Most banks know all kind of risk calculations for their products, but are like ostriches not responsive enough to change the business behaviour structurally despite the growing company risks in the last few years. A lot of transport companies are caught like a rabbit in the headlights because of increasing fuel prices and haven’t taken enough precautions for this.

What kind of animal is your company in the matter of risk behaviour?

Martijn Lofvers, Publishing Director & Editor-in-Chief
Supply Chain Movement
martijn.lofvers@supplychainmedia.nl