Planning for uncertainty or how to build supply chain resilience

Striking a balance between having enough inventory levels to meet customer’s needs without having a surplus is more than a challenge these days, as factors that can break distribution links are added every day to the already intricate supply chain, such as variations in the workforce, economic changes, weather, natural disasters, cyber terrorism, or global crisis events such as those caused by the COVID-19 virus and more recently the war in Ukraine.

Troubled times expose weaknesses in supply chains, stressing bottlenecks and reducing access to critical raw materials, suppliers, or capital. In turn, the ability to respond to these difficulties quickly and effectively depends on a variety of assets and business capabilities, such as replacing or augmenting sources of supply in response to partner inventory issues, rates, or restrictions induced by geopolitical issues or armed conflict, as well as having agile manufacturing processes that reduce the redundancies and optimize the product.

So that the most relevant point today is to understand that supply chains are designed to be profitable, but not necessarily resilient. And this is exactly where demand planning becomes so relevant in the creation of robust chains that increasingly allow to stay ahead of risks, as it is a fact that changes are here to stay and now need to be implemented faster than ever before.

It is no coincidence that what shippers want most is end-to-end visibility across the supply chain[1], making evident the need for investments in digitization and analytics.

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The new normal is so far away

The previous two years were marked by the pandemic. In the present, the war has returned to Europe, establishing a near-total embargo on one of the world's busiest avenues for cross-border trade, which will further reduce any remaining width in the global trading system. Consequently, the cumulative effect of these events will mark a new era for international trade processes.

Importers from London to Warsaw will soon face higher shipping costs, longer delays and an obstacle course of sanctions to navigate as Russia's widening assault on Ukraine complicates the movement of cargo between Europe and Asia[2].

In addition to this, new pandemic-related shutdowns in China along with the trade war between China and the U.S., account for the complicated variables facing the supply chain. So, each thread of this complex web of factors affecting its resilience must be examined and assessed separately to identify potential vulnerabilities and mitigate them.

[1] 2021 State of Logistics Report, Kearney, 2021, retrieved March 2022.

[2] War Shocks Ripple Across One of World’s Busiest Trade Lanes, Bloomberg, March 2022, retrieved March 2022.

A quick look into the future

If 2020 was a game changer, real-time data and transparency of performance across the entire supply chain will help organizations identify risks and exceptions early on and develop potential countermeasures in the months ahead.

?To unleash maximum value from planning operations, we agree with McKinsey & Company[1] that an advanced planning transformation should be at the top of the agenda for consumer-goods CEOs.

?Even the strongest supply chains still try to predict what will happen to later optimize performance based on their original plans. The problem is that the world is not predictable. It is necessary to have a supply chain that can adapt to change, and we're the best at it; our customers' successes back us up. Let’s talk about your Demand Management strategies.

[1] Consumer-goods companies must transform their planning end to end, McKinsey & Company November 2021, retrieved March 2022.

-Raúl Rizo. Sales Director?.