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Thriving and Surviving in a Turbulent World

Written By: Benoit Montreuil
Published On: December 3 2002

Introduction

We can aspire to survive and even to thrive in a difficult environment if we are disciplined, bright enough and have the right tools such as a Demand and Supply Chain Planning suite to support and optimize our decisions. This article outlines an adaptive management process for manufacturing executives.

A Turbulent and Demanding Business World

We try to run our businesses in a world that is highly turbulent and demanding. Competitors appear from everywhere. Innovation has become a way of life. Our clients pull us to offer them lower prices and costs-of-ownership, to increase our order-to-delivery speed and reliability, and to provide them with a highly customized capability.

From a Turbulent to a Troubled World

If that was not enough, this world we do business in has recently become even more troubled. Consumers' reaction to dynamically occurring events may have dramatic impact on demand for products and services. Certain markets will have major downturns; many markets will get even more turbulent. Crossing frontiers may get tougher. The lead time from overseas suppliers may get longer and more erratic. Local suppliers may also become slower and less reliable with their deliveries due to their own supply chain. A company can no longer take availability of materials, components and products for granted. This challenge is forcing executives in large multinationals to consider moving away from their highly synchronized just-in-time relationships with suppliers. Automatic reflexes for many will be to overstock materials, components and finished products in case of catastrophes; to put aside their just-in-time and lean practices; to reduce their costs by slashing employees, and to postpone investments.

Surviving and Thriving in Troubled Waters

We can aspire to survive and even to thrive in a difficult environment if we are disciplined, bright enough and have the right tools such as a Demand and Supply Chain Planning suite to support and optimize our decisions. Enabled by such a Demand and Supply Chain Planning suite, manufacturing executives can engage in an adaptive management process such as described below:

  1. Recognize that we are in troubled waters;

  2. Decide what we want to become through these troubled times;

  3. Track and sense our environment with greater focus and sharper vision;

  4. React rapidly and cleverly to occurring events and sensed warnings;

  5. Plan for thriving in troubled waters;

  6. Continually train and gear ourselves for forthcoming turbulence;

  7. Honestly and vigilantly monitor our fitness, performance and level of risk.

Each of these activities is leading us toward a higher survival probability, yet the real potential is realized through their synergistic application.

Note:
This is Part One of a two-part article. Steps 1 through 4 of the adaptive management process are covered in this part.

Part Two will cover Steps 5 through 7.

1. Recognize that we are in troubled waters

For some companies, it is obvious that they are deep in troubled waters. However, for many others this is much more subtle. At the senior level of management, the effect may not be apparent yet. For those of us in this boat, we need to dig into our businesses to obtain key information to assess the situation. This may require checking order-booking patterns for combinations of products, clients, regions and markets. Figure 1 shows an example of recent booking history for a given product in a specific market. The sudden drop in demand followed by a slow and hesitant restoration in demand is a sign of troubled waters.

Figure 1. The shock effect on bookings

We should also investigate our network of suppliers for changes in lead times, prices and availability. Lead times from the supplier shown in Figure 2 were previously about ten days, with peaks of up to fifteen days. Subsequently lead times became longer and difficult to predict, until week 90 when it was announced that there was no more availability for a sourced product for an unspecified duration.

Figure 2. Lead time history from a supplier in troubled waters

It may require even more in-depth investigations in that suppliers and clients may not have yet been pulled toward detectable changes in behavior. Thus, we have to rely on our network of contacts in the field in order to gather evidence. The key for executives is to determine the potential for turbulence and trouble.

2. Decide what we want to become through these troubled times

The pull from clients for our offer to be fast, reliable, price-attractive, innovative, personalized and flexible is not going to falter. Indeed, the troubled environment clients are facing will lead them to cherish these characteristics even more in support of their quest for prosperity. What has to be done so that we can maintain this offer and make profits?

Many of us will chose to withdrawal and wait in a spot as far away as possible from the main troubled waters, hoping to survive until better times. Many others will take on the challenge to ride the wild waters while maintaining their offer as best as possible. What is important is to make a decision, clearly aware of the potential risks and to act accordingly. Most of the Demand and Supply Chain Planning tools on the market provide the information necessary to make informed decisions.

3. Track and sense our environment with greater focus and sharper vision

It is most important in troubled waters to constantly track events in our environment. Our markets, clients, sales, sales cycle, payments from clients, performance from subcontractors and suppliers, to state a few, must consistently be monitored. Our overall demand and supply chain must be subject to up-to-the-minute scrutiny. Demand and Supply Chain suites such as the one provided by i2 Technologies, Manugistics, WebPlan or SET Technologies give rapid access to this information and evaluate the impact of our decisions.

For example, in Figure 2, as soon as the supply delivery process began to get out of control around week 60, flags should have been raised. Daily progression should have been monitored. Tight communication with the supplier should have been engaged. The latter breakdown in availability should have been known ahead of time.

This implies that we must give responsibility to individuals for tracking and sensing. It also requires that our information technology infrastructure be capable of sustaining such an activity. With a Demand and Supply Chain suite it is possible to capture information, to digest it, to broadcast warnings, to mine for details, and to get aggregate pictures.

4. React rapidly and cleverly to occurring events and sensed warnings

In troubled waters, fast and clever reaction is vital. For example, when we learn at 8:53AM that (1) a delivery of a critical component has not arrived as planned, and that (2) further deliveries from this supplier should not be expected with certainty for at least a month; then we must immediately be proactive and make adjustments. Otherwise our product may not be ready for shipment soon. In this case, initial monitoring permits us to learn that starvation will arrive in eight days. Thus we have an eight-day window to get alternative components on our assembly lines, and get the products rapidly to our clients. The countdown is starting.

A reaction implies a decision and an action. The decision must be supported by fast and easy analysis of potential options. Once the decision is taken, steps toward implementing the option selected should be enacted throughout our demand and supply chain. Ensuring that our personnel and partners are enabled to make such decisions and launch appropriate actions is essential. A Demand and Supply Chain Planning suite may support us in every step of the way towards adequate reaction to occurring events, every minute, every day, everywhere.

Note:
This is Part One of a two-part article. Part Two will cover

Steps 5 through 7 of the adaptive management process.

About The Author

Benoit Montreuil is founder and chief technology officer of SET Technologies Inc., a leading edge provider of demand and supply chain planning solutions and services for manufacturing business. He has extensive consulting and research experience. He has presented his work at numerous international conferences. He holds a Ph.D. in industrial engineering from Georgia Institute of Technology. He is Professor at Laval University and holds the Canada Research Chair in Enterprise Engineering.

He can be reached at bmontreuil@settechnologies.com.

For more information about SET Technologies, consult www.settechnologies.com.

 
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