Effective decision making requires sufficient information - provided in a timely manner , as accurate as possible and relevant to the issues at hand . Information on re-order levels , location of supplies , anticipated delays , and as indicated earlier , any costs for losses that can occur , and to whom the costs should be allocated to , must be defined with clarity . The responsibilities for that must be clear , without doubt at all , for effective accountability , and eventual control should the risks materialise .
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In the logistics industry , it can be argued that uncertainty occurs when decision makers cannot estimate or predict the outcome of an event or the probability of its occurrence . Uncertainty , therefore , increases the risk within the supply chains .
Competitor information mining ( in the most ethical manner ), should provide the supply chain teams with insights for continuous performance improvement . This can be used to define the competitive sweet spots that when adopted will drive value to the organisation and the communities of stakeholders . Awareness of the competition thrusts helps in developing and protecting own turfs , as far as value creation through the supply chains is concerned . The teams are therefore advised to keep up with the ever fluid competition data . They must have an eye for drivers of differentiation and superior service to all process customers , but with the ultimate goal being delivery of superior value to the final customer .
Data brings visibility within a supply chain . Visibility drives the degrees of certainty . The data that is critical in supply chains ranges from location , quantity and quality metrics , to environment factors like temperature , in the cases of moving cargo that is temperature sensitive .
Data can be static or it can be manipulated to become predictive in nature . This can assist greatly in scenario planning and answering the “ what if ” questions . Creating alternatives or multiple course of action , then , distils down the risks in the process .
Visibility is a key driver for supply chain transparency and certainty . Customers in the various stages of the chain desire to be informed about the state of the ‘ moves ’ of the cargo . Process status reports are critical in providing timely information and guiding key decisions in the supply chain .
Flexibility is another mitigating factor in creating certainties in the supply chains . While it is almost inconceivable that organisations can predict and anticipate every type of risk , one of the best ways to prepare for the risks is to create flexibility in the supply chains and supply organisations involved . The procuring organisations can construct in their models alternative sources of supply and suppliers . The suppliers must be readily available , must have the right skill sets , processes , technology , product / service know how and a deep understanding of the modes of delivery of the service or the movement of the cargo . They must also be nimble and possess great capabilities to adapt to the requirements .
To a greater extent , product availability is a key concern especially in complex projects ( e , g complex infrastructure and construction projects ), which require different components from multiple sources . The project managers and specialist , must know , from whom to source from , which location , and projected times of delivery . The costs of quality aside , projects over runs must be avoided as much as possible . These undermine greatly the financing and the anticipated returns from these projects .
Inventory management systems and working capital optimisation is another approach towards mitigating the risk of unforeseen changes or disruption in demand . However , holding unnecessary levels of inventory may undermine embraced systems like Just-in-Time manufacturing . The supply chains must therefore continuously focus on optimising inventory levels .
Collateral management and third party financing of inventories held can assist in optimising inventory levels , while assuring availability to meet demand . Balance sheet optimisation focused on the balance between required levels of inventories held and cost of the financing of the same to deliver on the demand for the inventories is key . Collateral management involving third party financing can lead to lean balance sheets while mitigating the risk of availability of products ( whether raw materials , spare parts or finished goods ). Delivery systems must also be planned and synchronised with inventory management systems .
In complex manufacturing set ups , maintenance is one key factor that mitigates against the risk of process failure and breakdowns . Maintenance can either be scheduled ( preventive ) of nonscheduled , based on plant performance or the manufacturer guidelines . Preventive maintenance programs must possess capabilities of foreseeing and preventing breakdowns arising from wear and tear . The companies can also embrace predictive maintenance , e , g using automations to get critical information about the equipment performance and efficiencies in the production line . This is a critical factor for preventive maintenance . Again , there comes the use of data to support plant performance to improve operational efficiency .
We can now consider quality as a key factor for driving certainty within supply chain . Products must be subjected to quality tests to provide feedback on their performance . Quality tests are essential part during production , to avert the quality failure being experienced by the final customers or consumers . Statistical analysis , predictive analysis and artificial intelligence are some of the methods that can be deployed in managing quality profiles and instituting quality improvement and control programs . Delivery of quality is an assurance of effective supply chain , that is predictable and stable .
While we can attempt to analyse factors for mitigating risks in supply chains , in summary , the use of data , both internal and external to analyse current situations and to predict the future still remain very fundamental . Risk and uncertainty are ways of life , for every supply chain professional . The present can only be used to predict the future and to eliminate some levels of uncertainty . Risk may never be fully eliminated , but can be managed through well thought out sourcing strategy .
Michael Nzule is the Finance & Strategy Director of Mitchell Cotts Freight Kenya Limited . He holds an MBA in Accounting with specialization in Marketing , and a Bachelors of Commerce ( Accounting Option Hons ) from the University of Nairobi . He ’ s a member of ICPAK . Views expressed here-in are personal . You can commune with him via mail at : Mikemaithyanz @ gmail . com .
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