By: Bob May

Bob May — Thu, 09 Jul 2009 14:41:40 +0000

Curtis,
If you look at the top ten items in Kevin O’Marah’s Figure 1 on Top Supply Chain Risks, you’ll notice the word ‘volatility’ showing up four times in association with supply chain costs and also volatility is implied in the fourth item on consumer spend in the context of volatile demand. Demand planning has typically focused on trying to accurately predict and manage demand and revenue and as we know, forecasting can only go so far in reducing risk. Differences between what was forecasted and the actual demand that arrives requires a company to be able to respond quickly and confidently in order to meet revenue and customer service targets. The same can be applied to the cost side of the equation. Risk mitigation strategies like dual sourcing and longer term supply contracts often cannot be applied across the board and therefore risk associated with volative costs will continue to be a real concern. Again, you need to have the ability to react confidently when significant cost changes occur. To do this, you need to be able to accurately model the impact of those changes as soon as they occur in order to understand the true impact on the business. ‘Real-time’ business modeling will continue to be an important risk mitigation strategy in itself because only a certain amount of risk can be ‘planned away’.

Comments on: Are you Ready for the Unexpected? Demand and Supply Chain Professionals Play a Critical Role in Managing Risk

By: Bob May