Posted by: Christian Verstraete | April 19, 2010

What a bit of Ash can do


Where ever you are in the world, you probably did hear about this volcano with unpronounceable name (Eyjafjallajokull) located somewhere in Island. Indeed, this volcano, covered by a glacier, disrupted the complete European airspace, leaving millions of people stranded and provoking shortages of goods. It’s a famous wake-up call, as we are so dependent of air transport.

Although such natural disaster cannot be planned, visibility and flexibility in the Supply Chain can make all the difference. Decisions need to be taken and having appropriate information is critical. let me give a possible scenario. You manufacture electronics products and depend on components that are shipped by plane. Well, you will not get any new supply for the moment. Some of your finished goods are shipped by plane, others by land/sea. In the current circumstances, wouldn’t it make more sense to use the remaining component inventory to manufacture products shipped by land/sea, rather than products shipped by air. Obviously, your standard planning systems will not pick that one up, as the volcano scenario has not been taken into account when developing the models.

In such circumstances, understanding clearly available component stock, product types, available capacity and resources, are critical to take an appropriate decision. Four key elements are needed to achieve this:

  • Information sharing with suppliers, contract manufacturers, logistics providers, distribution partners and all other players in your supply chain. This requires a collaborative relationship in which partners are willing to share information

  • Standardized business processes and data, ensuring the understanding of the information that is shared, as well as the clear delineation of the roles and responsibilities of each partner

  • An information backbone, consisting of point-to-point connections, an information hub, or a community cloud, to exchange the information and understand the situation (visibility)

  • Analysis and decision making tools to help take the optimal decision.

Once the decision is taken, the effectiveness of its operation will depend on the relationship with the partners and their willingness to adapt their schedules to help you achieve yours. This will demonstrate the flexibility and responsiveness of your supply chain. So, a little volcano in Island is a real good test. And realize that the ones who are the best at this, will reap the reward by providing better customer service. A disruption is also an opportunity. Too many people forget that.

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Responses

  1. Social comments and analytics for this post…

    This post was mentioned on Twitter by christianve: New blog post: http://tinyurl.com/y6zyu52 – What a bit of Ash can do #supplychain #collaboration…

  2. I am in the electronics distribution industry (the largest distributor in the world) but saddly realized most of the OEM mfrs did not have any plan B for this problem therefore most of them did not know what to do and worst no communication has been send out to the field but only what we see on the media. My point do they really have a plan B or better if it is a natural disaster there is not need to have a plan B?


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