Dan Gilmore’s recent article on the Political Supply Chain provides some clear scenarios on what may happen to the supply chain as a result of the recent U.S. election. 

Dr. Watson Says: When the cost of one part of the supply chain goes up, other costs become relatively cheaper. The optimization engine in network modeling tools helps you manage this trade-off. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Network modeling can help you figure out what you should do about it and how you should prepare.

Politics-- like natural disasters, moves by competitors, fluctuating oil prices- is another risk for your supply chain.

And, in general, network modeling tools can help you determine the impact of specific risks to your supply chain. That is, if you have a working model of your supply chain, you can quickly estimate the cost of new Hours of Service rules or "card check." This is the same as using a working model to estimate the impact of an unexpected shutdown at one of your facilities.

But, the value in network modeling is that you can use its embedded optimization to figure out what to do. These examples also illustrate the growing and critical trend of companies using network optimization tools not only to answer big questions concerning the entire network design, but also ask more focused questions relative to an on-going cadence of specific supply chain decisions that must be made. This is where the real power of these tools is increasingly being leveraged.

When the cost of one part of the supply chain goes up, other costs become relatively cheaper. The optimization engine in network modeling tools helps you manage this trade-off. In other words, optimization allows you to avoid the full brunt of a cost increase.

Specific to a political issue brought up in Mr. Gilmore’s article, if the Hours of Service rule changes, then over-the-road transportation (like truckload and LTL) becomes more expensive. This means that rail, inventory, and warehousing become relatively cheaper. To avoid the full extra over-the-road transportation costs, you may shift more to rail, ship fuller loads and increase inventory, or add a cross-dock to get closer to your customers.

Let's suppose for a minute, “card check” does get through the NLRB, as Gilmore suggests. If the "card check" rules will raise your cost of manufacturing, you can use network modeling to determine how to shift production volume. That is, you may shift volume to overseas locations and pay the extra in transportation to ship the product to customers.

Or, sticking with card check, let's assume your company has a few DCs that it worries might be soon unionized, and others that are less likely.

The CEO or CFO asks you to estimate the impact of a unionization move in those three facilities, and whether you should adjust the network flows and throughput of each warehouse to reduce the downside potential.

Would you like to start from scratch, using spreadsheets or a similar tool -- and probably lack confidence in the accuracy of the analysis?

Or would you rather have an existing model of the network, where cost and throughput variables for each DC can be quickly changed, and different scenarios run using mathematical optimization to determine the best possible changes?

Clearly, it's the latter. And that is what a growing number of companies are realizing.

Final Thoughts

No matter what you think about politics, political risks to the supply chain are something you should model and be prepared to address. This gives you another reason to consider bringing network modeling capabilities in-house.