Volatility has become the "new norm" in the supply chain, says Richard Douglass, Global Industry Executive, Manufacturing & Logistics, for Sterling Commerce. Manufacturers, distributors and logistics services providers need to reorient some of their practices specifically around this reality.
Douglass's observation derives from a study that he and other colleagues conducted into the origins of volatility, such as customer demand, changing markets or new-product introductions, and whether companies had "information black holes" that hindered their ability to deal with such volatile environments.
"There are two things that struck us: one is that agility in customer response is critical. It's as important as reducing costs or inventory. So companies have to balance multiple objectives in their supply chain and business.
Also, you would think that if agility is so important, because of the volatility, companies would collaborate more closely and systematically. An a-ha moment was that a lot of companies employ a lot of manual processes in their collaboration. Some have no systematic processes whatsoever. Companies still don't seem to be completely sharing information around inventory, point of sale, and production data to make it easier to collaborate and easier to respond to change in the market."
Companies are advised to invest more time and money in their trading partner networks, up and downstream, Douglass says. They also need to implement risk management processes and strategies.
The study suggests that so-called "extreme supply chain management" is a discipline that needs to be addressed. That's because volatility is now systemic and built-in, Douglass says. It's no longer episodic. There hardly is such a thing as a period of equilibrium anymore. Companies face constant change, and they need a new set of practices to deal with that reality.
