Page 10 - Risk Management Bulletin January-June 2023

RMAI BULLETIN JANUARY - JUNE 2023

ket share while bad complexity drags profitability with- 2. Landfill: We are raping the planet to manufacture
out a contribution to growth. Today, only 2% of com- the wrong inventories. Reduce waste by investing in
panies evaluate the tie between product proliferation the building outside-in processes to synchronize plan-
and market share growth. The elongation of the sup- ning processes from the channel to the supplier to
ply chain product portfolio requires a redesign of the sense and translate demand. This requires the redefi-
supply chain. Yet, only 9% of manufacturers actively nition of planning taxonomies. Evaluate inventory
design their supply chains. Unabated growth in prod- health monthly and continually design the supply chain
uct complexity without platform rationalization, to focus on right form and function of inventory.
recipe/ingredient standardization, and product com-
plexity analysis is a ticket to bankruptcy in this uncer- Talent
tain environment.
1. Talent Turnover: We are saying good-bye to first
and second-generation pioneers. Supply chain process
2. Demand Shifting: Companies wanting to grow de-
evolution began in the early 1980s. With the genera-
ploy demand shaping activities—price, promotion, ad- tional shifts, first and second-generation pioneers are
vertising, in-store merchandising, and new product
retiring. The problem? In many areas of the corpora-
launch. The problem is that only 50% of activities are
tion like Electric Data Interchange (EDI), Vendor Man-
evaluated and the cycle for analysis takes four-to-six
aged Inventory (VMI) and network management, the
weeks. When evaluated, companies find that over 60%
processes operate largely on tribal knowledge. The ac-
of activities shift demand increasing cost without im-
tion item is to audit to understand vulnerability for
proving market potential. The recommendation is to
older technologies and the potential risk impact due
simplify demand shaping activities in the face of tur-
to retirements.
bulent demand and use newer forms of analytics and
consumption data to measure effectiveness weekly. (If
you are in consumer products, this means abandon- Information Technology
ing the dependency on syndicated data and traditional 1. Budget Integration As a Constraint for Supply
technology approaches.) Chain Planning: While tight budget integration in the
supply chain sounds like a good idea, it cuts the life
3. China. Economics: Covid. The Covid story in China out the supply chain. The reason? The budget only rep-
for 2023 is unknown, but buckle your seatbelt. If China resents a point in time. As markets shift, if the supply
is an important market, expect wild swings with illness, chain is constrained to budget assumptions without
market shifts and policy. Start to predict demand based updating the budget based on market shifts (which is
on market factors and abandon the historic market impossible in a large organization), the supply chain
patterns as a reliable source of demand. If China is a struggles to deliver reliable supply. As a result, the
major source of supply expect major disruptions and budget should be an input into planning, but not man-
start to move operations to a more stable base of aged as a constraint.
manufacturing.
2. Tight Integration of Planning Into Enterprise
Climate Architectures: Today’s focus is on trying to make im-
perfect data perfect. As a result, supply chain planning
1. Water: The redefinition of the world’s water re-
serves no one well. Shift the focus from the use of
sources on the planet with climate shifts is a major risk
planning technologies as a system of record, to build
to the supply chain. Barge traffic up and down major
a collaborative planning environment to allow cross-
rivers may not be possible, and manufacturing sites re-
functional teams to collaborate on the impacts of
quiring large quantities of water may require reloca-
what-if analysis. Accept that planning will never be
tion. Look at the impact of the shifts of water on the
planet closely in your supply chain strategy, and in the perfect in the spirit of Eisenhower, "In preparing for
battle I have always found that plans are useless, but
process, think hard on how to be a good steward of
planning is indispensable." If your planning systems are
the planet’s resources.

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