The pandemic but also climate change teaches us hard lessons. Many an economist but also many a planner will have reached for his head when the pandemic broke out. Every scenario could be thrown in the bin. And right now, every scenario is coffee-gazing. What is happening today no one could have predicted three months ago.
Traditional forecasts and methodologies barely offer guidance. Consumer behaviour has changed dramatically. Lockdowns vary by country and rules change by the day. And the dramatic switch to e-commerce by consumers may be logical in hindsight but not predictable.
Uncertainty
What the coming months will look like is extremely uncertain. Where economists had expected a further rise in joblessness for the US, it has suddenly dropped considerably. What is clear is that now more than ever, end-to-end visibility is needed within supply chain management. A supply chain that links planning and execution in real time on a global scale.
If the current network platforms will not be able to seamlessly integrate planning and execution, demand-driven logistics will not be possible well in the current context. The time horizon for planning has seriously shortened and is now riddled with increasing uncertainty. You therefore have less and less time to react and correspondingly fewer choices.
Coordinated control of planning and execution is critical to logistics performance, whether it is cross-docking to speed up retail replenishment and avoid replenishment, or dynamically dispatching last-mile shipments to meet delivery requirements. Demand-driven capabilities, such as deferral, need to be woven throughout the delivery network.
The demand-driven manufacturer
From a dispatcher's perspective, there are many variables that you think you have little or no control over, such as consumer buying patterns, fuel costs, supply disruptions and capacity allocations. You can try applying statistical prediction techniques or even machine learning, but these variables are always difficult to predict. Regardless of how low you can drive the prediction error, you will always have to respond to real-time problems.
One piece flow
Today, shippers need to incorporate a 'few-and-four' approach based on collaboration and consolidation at the point of origin to move smaller volumes more frequently based on real-time demand updates. We should remember that it was the dominant philosophies upstream in the supply network that realised the enforcement of minimum order quantities to increase efficiency.
Goldratt
In fact, it is possible to shift to smaller order quantities and actually reduce costs, as long as real-time network visibility and collaboration reduce variability for all trading partners and eliminate information lead time from a demand perspective across all layers and echelons.
Sub-optimising each layer in the supply network, separating layers with large inventory buffers and the 'throw it over the wall' mentality that creates the bullwhip effect upstream in the supply network all need to be eliminated in order to order smaller quantities from suppliers while keeping costs the same or even reducing them. Once all trading partners have a view of the big picture - i.e. no one is really paid until the end - a supply chain has the chance to really move with unexpected shocks, such as caused by a pandemic or climate change.
Author: Hans Groen, Consultant Supply Chain and Performance Management
