Leadership

Six Steps to a More Flexible Supply Chain

By Jessica Stillman

Updated on: January 8, 2009 / 11:17 AM EST / MoneyWatch

The Find: With commodity prices, the availability of credit and currency valuations swinging wildly, one management consultancy believes companies need a more flexible supply chain and is offering a strategy to help them get one.
The Source: A report entitled "Lowering the Volatility Quotient with a Flexible Supply Chain" from Diamond Management & Technology Consultants.

The Takeaway: When it comes to your supply chain, threats can appear from volatile commodity prices, changes in the availability of credit, currency valuation swings, and the ups and downs of global equity markets, or a combination of these variables. So how can you get the most flexible supply chain possible? Diamond is offering a report outlining their six step strategy. In brief, it works like this:

Understand the key variables that impact your supply chain. Look for volatility across five core elements: plan (supply, demand, inventory); buy (sourcing location, warehouse capacity); make (location, schedule, labor); deliver (delivery schedule, route, transportation mode) return (quantity, salvage, cost of disposition).
Differentiate between "temporary" change and "structural" change. For example, a consumer products manufacturer needs to monitor and respond to temporary fluctuations in the price of metals that go into their packaging but should also look for larger trends that could warrant a shift to plastic packaging. The capital required for that structural change would outweigh the significance of easing day-to-day price volatility.
Establish trigger levels at which those variables dictate changes to your tactics. Companies that actively anticipate the future will be able to execute changes more quickly than the competition.
Monitor in real-time (or as close as you can get).
Build an "emergency response" capability to implement changes dictated by changes in your key variables. Create a systematic plan and establish decision rights so there are no surprises in responding to volatile changes in the supply chain.
Move now. After two decades of relative stability, wildly fluctuating oil prices, interest rates, and other important supply chain variables appear headed for constant volatility.

The complete, detailed report is available on request.

The Question: Is Diamond's supply chain strategy sensible for you business?

(Image of chain by Max Klingensmith, CC 2.0)