Probing Uncertainty by Digging Deep Within in the Supply Chain for Answers

Over on Procurement Leaders Blog, there's a great post by former LG Electronics CPO, Tom Linton, on probing and going deep in one's supply chain for answers in environments with great uncertainty and volatility. He writes: "At LG Electronics in late December 2008, as I looked into 2009, I saw nothing." For just about every sector of the economy, this was a time, if you recall, of great uncertainty. Earlier in the fall, banks had stopped lending to each other, the capital markets were a mess and demand uncertainty was greater than ever before.

As Linton puts it, "No forecast. Uncertain supply. Rising costs. It's at these times we need to go deeper into our supply base to find answers. I flew from Seoul to Taipei and spent two days visiting our upstream suppliers. By talking with suppliers, of my suppliers, I gained visibility into uncertainty. By looking multi-tier (second and third tier suppliers), I gained insights into cross industry demand and new ideas on how to manage my way through the first half of 2009."

Most certainly, there is no substitute for on-the-ground probing in times of crisis and by tying such efforts to supplier development programs focused on risk reduction and cost-take out, it becomes more possible to justify initiatives to get to know lower tier suppliers. Yet in the past few years, there's another way to understand uncertainty as well: supplier management and supply risk management platforms have sprung up that allow us to model our multi-tier supply chains and understand events happening one, two or even three levels down. Content companies (e.g., D&B) and software companies (e.g., SAP) are both getting in on the action.

Granted, there will never be a substitute for putting the proverbial feet on the global sourcing street. But insight-based systems that let us peer into the activities of our lower tier suppliers (provided we know who they are) are an ideal complement that can help us direct further probing and action along the lines that Linton suggests.

Jason Busch

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