John Brown - Coca Cola

How often have you heard these words during a meeting in your office? “Say what?  Forecast for an unplanned event?  Isn’t that like buying flood insurance in Phoenix?

Regardless of whether or not we choose to plan for them, catastrophes happen. However planning ahead can mean the difference between success and failure when these situations arise.  Let’s look at the recent earthquake in Japan.  Should we forecast for earthquakes?  In Japan earthquakes are a daily occurrence so the answer should be yes.  Is it necessary to forecast for a 9.0 earthquake?  Maybe not, but it happened.  Follow the earthquake with a tsunami? This is definitely a possibility seeing how Japan has so many coastal regions.  Now we need to forecast a third contingent event, i.e. the damage to the Fukushima nuclear reactors and then identify and plan for the global impacts, especially in the electronics and automotive industries? OK, now this is getting ridiculous.

All of the above events happened and they will happen again. The event will probably not be an earthquake and most likely will not happen in Japan. But somewhere, sometime, you can be sure that we will experience another significant disruption to our supply chains.  Take for example, what just happened at the Shell oil refinery on the island of Pulau Bukom near Singapore. This is the company’s largest refinery, which just experienced a major fire and as a result has to be shut down as of 03-Oct.  What will the impact be?  Only time will tell.

So what message is here?  Simply put:  We must know and understand our value chains.  Where the dependencies and what are are the weak points.  What would we do if we lost manufacturing at site “X”, lost supply from supplier “Y”, or were suddenly unable to use shipping route “Z.”?  What if a pandemic broke out in the country where we have our greatest revenue base?  Each company and each value chain has unique characteristics.

We cannot afford to think only in terms of getting products made and delivered either.  We must think about the effects that risk events will have on the demand for our products.  As many have seen, when the economy tanks (also considered to be a risk event), the demand for durable goods declines and  purchasing discretionary items becomes delayed because consumers hunker down for the economic winter, and hope it doesn’t last too long.

I look forward to sharing my experience as the keynote speaker and meeting all of you at the upcoming Supply Chain Planning and Forecasting: Best Practices Conference in San Francisco. As far as Risk Management is concerned, don’t expect a simple answer because unfortunately there isn’t one.  You will, however, learn how to build a framework that can make you more prepared for the unknown – and plan for it.

John J. Brown, PE
Director, Risk Management, Supply Chain Development
The Coca-Cola Company

Hear John’s Keynote Presentation at:

Curtis Brewer

It’s a warm June morning in Omaha, the phone rings and you answer.  The man on the other end of the line explains that there has been an explosion at your production site in North Carolina, thoughts race through your mind, first to the safety of your employees, then to the condition of your site.  This was the scenario played out by the employees of Con-Agra Foods this past June 9th when an industrial accident caused an explosion that left three employees dead, a large number more severely burned, and the south wall of the building in Garner, North Carolina gone.

As extreme as this example may seem this is just one of many types of unexpected events that occur around the world daily that Companies need to be ready for.  Today more than ever in the past, companies are taking the time to identify areas of risk and also what they would do if those events occurred.  They are categorizing their risks, determining whether they are discrete or continuous events, and what it would take to recover from them.  More and more they are modeling the events and affixing a cost to them in order to better understand the total impact they will have on their businesses.

Risk is something that we should all be aware of and better understand.  As a Demand Manager how do you capture risk in your business in your planning?  In a lot of companies today, the Sales and Operations Planning meeting has become one area where risk is openly talked about and planned for.  This real world discussion helps to keep the business informed and also allows for appropriate scenario planning.

In the AMR Quarterly Study of Risk, Kevin O’Marah highlighted the vast change in the perception of risk by Supply Chain managers in the last 12 months.  Supply Chain managers are beginning to move away from IT investment as the best way to mitigate risk toward collaboration and modeling.  They are also working to refine and strengthen existing processes to better safeguard against unexpected events.  They are also working to better educate and inform their employees about what steps are being taken in regards to Risk and how those employees play a role in the process.

As globalization becomes more and more prevalent throughout our lives, we enjoy the benefits of lower cost goods, but we also live with greater levels of risk in terms of our supplies.  This higher level of risk has created a lot of cases for our businesses to get better at this critical part of daily operations.  The best news is that we as Demand and Supply Chain professionals have a critical role to play in helping our companies to weather these storms.  So I ask are you ready for the unexpected?

The Institute of Business Forecasting & Planning – IBF and I look forward to your comments and thoughts.

Curtis Brewer
Head of Consumer Forecasting
Bayer Crop Science

See CURTIS BREWER Speak at The IBF’S:

$695 (USD) for 3 Full Days!

October 12-14, 2009
Orlando Florida USA