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Planning For Our Future

August 5, 2010

The Logistics Viewpoints blog raises some good questions about the scope of most supply chain risk assessments and preparations.  In the story of a well-fed turkey, the article highlights our tendency to focus on the most obvious questions and to ignore the ‘what if’s’ associated with our future.

In their excellent report earlier this year, insurance consultants MacTavish made similar observations regarding the tendency of risk management to focus on the past, rather than provision for the future. The turkey probably could not have avoided its fate, no matter how much it planned. Hopefully, the same is not true for us.

The Logistics Viewpoints article concentrates on forecasting, which is after all a fundamental element of many negotiations and post-award contract management. “Forecasting is based on history. Many supply chain and financial forecasting models are based on bell curves, with the tails of the curve representing highly unlikely events that can be “safely” ignored, at least for forecasting purposes. But a little examination of history will show that rude surprises, like the global financial meltdown we recently experienced, can intrude. All forecasts are thrown out the window when such catastrophic events occur. That is why companies should apply supply chain risk management to product forecasts and not just to factories, suppliers, and IT systems.”

The point it makes is that organizations rarely undertake scenario planning related to major shifts in forecast – up or down.  And given the diversity and volatility of the markets in which we trade today, it is time that we undertook more scenario planning and increased our capbility to deal with the unexpected. Indeed, in previous blogs, I have highlighted how the role for many in the supply chain and commercial world requires them to act increasingly as ‘managers of uncertainty’. At the corporate level, this ability is set to become a major source of competitive advantage.

One Comment
  1. Tim,

    Good points and a great catch phrase: ‘managers of uncertainty’ TM that one!

    It seems the only consistency is exponential complexity, volatility and the unexpected. The challenge is planning without in some way creating more complexity.

    Jorge
    Founder of The Online Bar
    http://obacard.me/jorge

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