Is There a Supply Chain Cliff Looming?

The term “Fiscal Cliff” is now as well known as the outcome of the US Presidential election. Don’t close your browser yet, this won’t be a political discussion. For anyone who knows me, my only political rant happened when the Ontario Government raised the beer tax. As you know the “fiscal cliff” is a warning from leading economists that given the tug-of-war between significant budget austerity and an economic recovery still hanging in the balance, there will be a double-dip recession if Washington fails to respond in time to make a difference.

Given the increased risks that just didn’t seem to impact yesterday’s Supply Chains, are the Supply Chains of today facing a “cliff” similar to the financial cliff if they fail to change how they respond to these new challenges?

Take the Wall Street Journal article on Sharp, stating that Sharp’s “future is at risk”? Sharp was counting on steady growth and significantly increased capacities of liquid crystal display panels. When the growth didn’t happen, that translated into excess capacity and the company losses “ballooned”. Sharp’s President, Takashi Okuda reflected, “We lacked a sense of speed. The situation could have been different if we took steps mores more quickly”. Sharp is not alone. Look at any company struggling with the impact of recent natural disasters, managing through a fragile global economy, or dealing with strikes, recalls, big data and extended Supply Chains. Every link and every issue pushes you closure to the edge of the cliff. The problem many of these companies are facing is that they continue to manage today’s challenges with yesterday’s tools. These are the tools where planning was good enough, just like a horse and buggy used to be good enough to tour around town. However, tools that place an equal importance to planning, monitoring and responding in time to make a difference are the new necessity. It’s not just about speed and doing the wrong things faster. It’s about modeling the data and analytics of the extended supply chain and keeping a pulse on every node so you can plan, monitor and respond to the unexpected swiftly and with confidence. Understandably though, it can be difficult for companies to make the necessary changes to their processes and toolset while in the middle of dealing with keeping the organization afloat given the challenges mentioned. In many cases these companies simply look to improve the current use of ERP or Excel and drive some incremental improvements. However, your current processes and the band-aids applied to those processes could be included on the list of supply chain risks if it means an inability to plan, monitor and respond. Supply Chain improvements are certainly a difficult puzzle to piece together for the talented individuals tasked with keeping their organizations competitive. So, will incremental improvements be good enough or is a breakthrough required in time to navigate the next catastrophic event? Is a Supply Chain intervention required? How close is your Supply Chain to the cliff?