Working the kinks out of your supply chain

Improvements in speed and visibility provide payoff for business and security

Resilience, speed and visibility. Those are three magic words that make any supply chain manager's ears perk up.

And Scott Byrnes can explain the connections between them. Byrnes is vice president of marketing at Amber Road, which makes software to manage global trading, and he has interesting tales to tell about how customers are looking at their supply chains today, given the ever-more-interconnected nature of commerce.

"Think of the flooding in Thailand, the volcano in Iceland and the tsunami in Japan. Those three things shut down a lot of people's supply chains," Byrnes says.

"A disaster in what might formerly be considered a remote part of the world now impacts everybody."

As a result, resilience has risen up the ladder of corporate concerns, with manufacturers and buyers looking to diversify their supplier bases and modes of transportation.

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When the Eyjafjallajokull volcano erupted in April 2010, critical air routes around Europe were closed. "The companies that responded fastest secured the excess [alternative] transportation capacity—by rail, for example—that was available. So the leaders locked those channels down pretty quickly and shut everybody else out," Byrnes says.

When it comes to getting visibility into process, Byrnes relates the story of one pharmaceuticals company that started looking into supply chain problems in regards to customer service problems.

The company found that a number of its supply chain partners were consistently providing inflated lead times—a common practice that suppliers use to avoid missing deadlines or being unable to meet a spike in demand. However, the result for the pharmaceutical company was an extra $100M million of inventory stuffed in the chain. (This is called the "bullwhip effect," in industry-speak.)

Initiatives that improve security in the supply chain can often yield other business benefits. (See, for example, How to Improve Supply Chain Security (The Trick Is to Keep It Moving), from CSO's special Global Security issue back in 2004. The concepts still apply.)

Copyright © 2012 IDG Communications, Inc.

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