New terms like agility and resilience are entering the manufacturing lexicon post September 11. IT will be crucial to the task of keeping stockpiles to a minimum and maintaining flexibility in meeting changing demand as companies address new supply chain home truths. In the wake of the terrorist attacks some companies found the very technology that let them operate with minimal inventories, particularly the software they use to track supplies, made them more nimble in a crisis. That adaptability will help them continue operating if disruptions like those caused by the September 11 attacks and the anthrax mailings become more common.
Since global leaders declared their campaign against terrorism some organisations have experienced a wartime effect on their business environment, and nowhere more so than in the supply chain. As a result both users and vendors will have to work at making supply chain systems more disaster-ready, Boston-based AMR Research analyst Michael Bittner told US Computerworld. For example, companies should build automated alternative sourcing functions into their systems, he says. Technology that can generate international trade compliance documents is also becoming more critical for users, Bittner adds.
"The value of tapping a single source for strategic supplies will decrease. Enterprises that have to get material from a single source should increase their emphasis on the supplier's capability to recover from a disaster," Gartner analyst Dan Miklovic says.
"Enterprises should value geographic proximity more when they make decisions about which suppliers to use. With multiple sources of supply, enterprises should improve collaborative responses and boost suppliers' transparency. The importance of supply chain execution and visibility applications will increase while that of long-term planning will decrease. With dramatically increased uncertainty, planning for different scenarios should take precedence over optimising production based on stable, consistent operations."
Miklovic says extended supply chains are vulnerable when they are visible, accessible and static. "History shows that in times of war, when manufacturing sites were high-priority targets, countries could maintain or even increase factory production if they could develop a resilient, hidden, and flexible supply and manufacturing strategy.
"When key components must remain visible, enterprises should strive to make them secure and inaccessible. Enterprises should place more value on sources of supply near their production lines. Finally, supply chains need the flexibility of multiple sources and relationships so that production can continue even if a supplier's capacity is disrupted," he says.
Miklovic says stockpiling inventory at various points in the supply and production chains can help an enterprise survive.
Holding a buffer of material at each point in the supply chain, while much less cost-effective, can ensure that production continues. He says should a component [maker] in the supply chain become inoperative, enterprises should have a ready supply of the materials that component maker would normally provide. A collaborative supply chain can maintain the visibility of these stockpiles to the enterprise and even optimise the amount stored, based on production rates and expected time to recover from failures.
However Gartner warns that while stockpiling inventory will fix short-term problems, it could introduce yet another level of complexity and cost. Gartner endorses the use of supply chain planning (SCP) tools to analyse target inventory levels to maximise return on investment and react more nimbly to changes, and says enterprises that have not deployed these tools should look for quick work-a-rounds like tools from business service providers or simple SCP models.
Many companies are turning to high-level modelling tools to help them build adaptive supply chain networks. The goal is to be able to access the right information at the right place at the right time in order to make the real-time decisions that will keep the supply chain alive and flourishing during uncertain times.
"Collaborative supply chain management, strategic partnering, and other relationship-based initiatives such as collaborative planning, forecasting and replenishment (CPFR) will become more crucial to success than we have seen in the past," says Dawn Russell, assistant professor of business logistics in Penn State's Smeal College of Business. "Companies will be compelled to work collaboratively to develop new processes and technologies that penetrate the entire supply network and accommodate the additional constraints on the system."
Kristian Steenstrup, Gartner research director, business applications, says the same high-level modelling tools that can be used to achieve zero inventory of work in progress and just-in-time deliveries can be adjusted and tuned to ensure the availability of reserve and safety stock throughout a supply chain. "A lot of the infrastructure and tools that were being developed, and the skills and tools for supply chain management, are actually very adaptable to the new environment. So organisations are able to be agile and resilient by using the same technologies that they'd already been deploying," he says.
"It does - however - result in increased cost. Also, some manufacturers who are totally geared towards a zero inventory model really don't have the capacity to stockpile goods because they don't have any warehouses. Companies like Dell have got some significant problems because they rely very heavily on zero inventory, just-in-time delivery of components and air transportation. It's more difficult for them to change to a resilient model," he says.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.