I want to change topics now to something that may be a little controversial - Is Just In Time past its time for value in the supply chain? I want to clarify that question and focus the discussion now with another clarifying question. Considering all of the 'black swan' natural disaster events and the effects of the extended global supply chain, is there more value in flexibility in the supply chain? I have been considering these questions for a while now and they have been especially clarified by my series on extended supply chain collaboration. You may remember that I discussed the importance of collaboration in building a flexible and efficient supply chain. This has ramifications on the Just In Time practices and your business continuity planning required for your extended supply chain. Maybe its time for you to develop your supplier support network to provide the ability to easily switch to another supplier in the event of a ‘black swan’ event.
Whether or not you believe in global warming or the climate is changing, you must recognize that the frequency and impact of natural weather events are increasing. Add to this the recent tsunamis, and global unrest and wars and you have a witch’s brew of events that can impact your extended supply chain. You can stick your head in the sand and try to ignore these events but this will only cause a greater and unpredictable impact to your organization. The more prudent approach is to evaluate the potential events based on climate and world events and the potential impact on your supply chain. This will help you to develop an approach to overcome the impact that such events could have on your extended supply chain.
This is why I think that extended supply chain, including your extended supply chain partners of course, should be a primary focus. Then Just In Time principles can be incorporated as your secondary focus. You will need to define what ‘flexibility’ means to your organization and extended supply chain. This will require developing a supply chain continuity plan that includes suppliers, carriers and value added service providers. In the IT industry we used to call this a Disaster Recovery Plan and now the value of this type of planning is extended to other key areas of the organization. The value provided to the extended supply chain by a robust supply chain continuity plan can come from two perspectives; first as insurance against impact by natural or global events and second through potential value new suppliers and carriers can provide through new negotiating powers.
One last piece of advice, don’t think of natural disasters or global unrest as the only factors that can be alleviated, or planned for in your supply chain continuity planning. You should take into account other factors such as factories being destroyed or closed for safety reasons, raw material availability (this is critical to cost controls too), transportation increases or even new routes opening (such as the expansion of the Panama Canal).
And now for the audience participation portion of the show…
Have you considered the critical factors required to support your extended supply chain? Have you developed a supply chain continuity plan? How do you work with your extended supply chain partners to limit the impact of natural disasters or global unrest?