The following column is taken from our recent Supply Chain Digest Letter on Supply Chain Performance Management. To download an electronic copy of the Letter and access a wide variety of other resources, visit: Supply Chain Performance Management Resources Page.
Global supply chains are complex. Everyone knows that. The high volume of customers and suppliers coupled with the distance, language, and the number of execution activities can be difficult enough to develop let alone manage. The task of consistently getting the processes to perform as designed can be overwhelming. Everything that does not work as designed falls into Plan B, reactive execution.
Many companies use their core OMS, TMS, and WMS solutions to address this complexity. Others outsource the challenge to third party logistics providers. The majority use a combination. The common expectation is that some percentage of orders and shipments will fail, an alert will go off, and someone will fix the problem. Plan B kicks in.
The problem is that too many companies fail at Plan B. One reason is that alerts come too late to implement good Plan B options. The root cause for this is that controls and alerts are focused around order transaction events. Traditional points of data exchange have time lags built in between them. These lags can be hours, days, or weeks. The longer it takes to learn about a failure, the fewer Plan B options are available and the available options are more costly. Most companies can’t measure alert timeliness and don’t measure Plan B response effectiveness.
The other reason for Plan B failures is that problems are perceived as isolated issues. Plan B actions focus on getting the process to catch up. Alerts don’t provide situational context for Plan B decision making. There is limited visibility to changes in demand, inventory plans, or other orders in the pipeline. This is due to alerts being generated by applications or 3PLs with limited operational scope. Without this situational context, courses of action are frequently inefficient or just wrong.
Effective Plan B execution is first enabled by focusing process controls on the high risk root causes of failures rather than on transactional data. This often requires collaborative integration to data sources not commonly visible. The other step is to assess the situational context along with an alert and prescribe the appropriate response. Enabling these capabilities requires an application that collectively monitors orders, shipments, inventory, and demand forecasts across tiers of supply chain relationships.
Measurements derived from this broader data scope are better positioned to identify trends of high risk failure points and root causes to control.