Planning Ahead (Already) For Supply Chain Shortages This Holiday Season (Part 3)

Click here for Part 1 and Part 2 of this post.

Dickens may have gotten it right in A Tale of Two Cities, saying "it was the best of times" and the "worst of times" all wrapped up in one. But this holiday season, debtors prison and pea soup industrial fog may very well be replaced with procurement purgatory and a supply chain fog just as thick as the actual low-hanging, polluted cloud cover of Victorian London. Yet there is hope. But you won't hear it talked about in the logistics and supply chain press as much as it needs to be because in large part, the biggest challenge on the holiday season planning front has more to do with supplier management than it does sales and operations planning (S&OP). Indeed, if companies want to plan more effectively given all the uncertainty surrounding the economy and consumer whims this holiday season, they're probably better off proactively working with suppliers to create a range of options and drive responsiveness than they are running one more model that attempts to model demand based a variety of GDP, consumer spending, unemployment, same store sales and related inputs.

So let's dispel with the notion that we can get really good at predicting demand at the level at which we need to on a global basis where lead times are many, many months. Even Apple, which has some of the best supply chain minds in the business working overtime like other high-tech manufacturers and retailers on holiday planning, will have an exceptionally hard time precisely predicting demand for new and existing SKUs. Given this, perhaps a better use of time is on getting closer to suppliers using a multi-step plan of attack which begins by gaining visibility into lower tier supply options, factoring into account past performance, lead times, geographic concentration, price, etc. and working through the top multi-tier echelons to create greater responsiveness.

For example, an analysis of a high tech manufacturer's SKUs might reveal less standardization of underlying components specifications and even sizes (e.g., screen types, cases, capacitors, chips, memory, etc.) than is possible. Yet by driving greater standardization across underlying parts and components, it becomes possible to concentrate spend on fewer suppliers (but hopefully in geographically separate facilities and areas) and become a customer of choice. This, of course, means that when demand signals shift, that suppliers are likely to be able to respond that much more quickly. Such a course of action might even involve working with suppliers to help them leverage additional sources of supply and facilitating the qualification and auditing of new lower-tier vendor facilities in an attempt to speed up the first article testing and ultimate production ramp.

So in planning for the holiday season, let's put the myth of the 3PL panacea to bed once and for all. At best, a 3PL is like a good public transportation system. Last I checked, in the Chicago burbs, you still needed to wake up, down a cup of coffee and drive (or hitch a ride) to the Metra station on your own, lest the train would still leave without you. Try catching the early train after a long night out entertaining clients, a screaming baby at 3:00 AM and a wife with a migraine, and you'll catch my metaphor that a 3PL can only help at one, albeit very critical, juncture in the supply chain.

Jason Busch

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