There are many aspects of volatility in today's supply chains, Douglass notes. Demand volatility is constant but has been accelerated in the current economy as companies have had to respond to sometimes dramatic changes in consumer buying habits. Another prevalent driver of volatility is merger and acquisition activity, he says. "M&As force companies to integrate new customer bases, new supply chain networks and new systems. This requires a major effort that is essentially ongoing." Another source of volatility is "right sourcing," which has become an underlying theme of many supply chains. "When a company changes where it produces or sources, it effectively also changes and rearranges supplier relationships and logistics relationships - and that creates tremendous volatility," he says.
The growth in volatility also means more supply chain risk and underscores the need for risk management, Douglass says. Companies need to take a macro view of how to manage their supply chain in light of these risks. For example, he says, when considering issues like where to locate facilities, they should look at how susceptible potential sites are to natural disasters or pandemics. If there are certain regions of the world that might be affected less than others, look at how the supply and demand chain can be shifted around to take advantage of that, he says.
One way companies can combat volatility is to apply the notion of lean manufacturing across the supply chain, Douglass says. "From a technology standpoint, companies should ask how they can create lean commerce to reduce complexity in underlying technology platforms, which will enable them to support the rapid changes they are seeing in their business."
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