In the previous blog we discussed that the organization functions in conjunction with its immediate surrounding and society at large and thus understanding the ecosystem is preliminary to building an agile supply chain.
The third imperative is –CONDUCT SCENARIO PLANNING FOR IMPACT ASSESSMENT.
The next step after understanding the ecosystem is to conduct scenario analysis to gauge the impact of macroeconomic scenarios on the organization’s supply chain & sourcing strategies. Conducting scenario planning is simple for predictable events and market fluctuations. However, how can organizations tackle events that cannot be predicted and have a negative impact on the supply chain?
For example, consider the following events, which require procurement to establish theoretical scenario planning
- Health threat – fall in work force attendance would result in supplier capacity cut in half.
- Economic meltdown – suppliers may experience financial distress or lack of access to capital resulting in shut downs.
Let us study this imperative with the following case;
Consider a case which involved a leading manufacturer of copper wire seeing trends like increasing supplier power, few new mines, continued decline of mined iron grades and limited copper substitution.
With the above trend, the company faced following issues;
- Maintaining a healthy relation with the existing suppliers.
- Lack of relevant information regarding the new suppliers.
- Lack of information resulting in the risk of selecting inefficient suppliers.
- This in turn was resulting in delays in awarding contract to the suitable supplier.
The above issues can be resolved with the help of technology by
- Accommodating supplier views, giving them a sense of ownership coupled with a transparent process, that will help build a relationship of trust between the two and thus leading to extended support in times of adversity.
- Providing a collaborative platform to negotiate a contract.
In the next blog we will explore imperative no. IV in building an agile supply chain.
