Our supply chains are incredibly vulnerable and there’s nothing like a crisis situation to reveal just how susceptible they are. When a black swan event abruptly occurs, demand can suddenly fly through the roof or drop off a cliff. Either way, we have to adjust in some form or fashion …and fast.
As we recently experienced with the pandemic, demand fluctuations, operational disruptions and shipping challenges can easily stretch and strain both macro and micro supply chains to the maximum. As the deviations of too much or too little inventory play out in real time, these demand fluctuations at the end-consumer level create larger fluctuations and erratic requirements in demand at the manufacturer or raw material supplier—which is called the bullwhip effect. We end up utilizing inventory as a buffer to try to absorb demand and supply variability simultaneously, which, in turn, impacts the cost of the supply chain.
As a result, even after the triggering event, today’s VUCA world (volatile, uncertain, complex and ambiguous) requires that a supply chain be both responsive and agile. But how do we continue to ensure the right product arrives at the right place at the right time—especially in the face of high process deviations and uncertain inventory performance?
The answer primarily lies the answer to the question, “Did we respond in a way that caused a lot of effort and heartache or did we use in our core technology (i.e., SAP) to right the ship?” If we did the latter, it means we not only met requirements but also adapted to the changing situation. Another way to phrase this question, “Was our supply chain resilient or agile?”