How do planners build risk assessment into our S&OP processes? Some tools might include a risk register, SWOT analysis, probability and impact matrix, a tornado diagram, modeling and simulation, probabilistic analysis, or expert judgement. Here are results from the survey we took in January 2023.
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Risk Planning for 2023
The sun just set on another year, a new year is dawning, and there are clouds on the horizon. Will these clouds turn into a storm? If so, how bad will it be?
Demand planners are used to forecast volatility, but there are also many elements of external risk that could significantly impact our businesses. Will the market continue toward a larger downturn? Will Covid surge again, or some other disease? Are the recent attacks on utilities in the Carolinas and in the Pacific Northwest the beginning of some larger threat to our infrastructure? What major cyber-attacks might we see in 2023? How will the price of oil and natural gas be impacted by the ongoing war in Ukraine?
We live in a world full of risk. If the COVID-19 pandemic taught us anything it should be that we cannot take current stability for granted.
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Reflections on Another Wild Year
Think back to the beginning of this year. Everything was still shutdown. We were waiting for the number of COVID-19 cases to drop off so things could start opening again. We hoped vaccines would get the pandemic under control and help boost economic growth so we could return to a normal way of life. Upwards of 20 million people were still unemployed, but consumer sentiment was up from an eight-year low in April 2020.
Then 2021 happened! And what a year it has been. Just think about some of the unexpected events we saw.
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Phugoid Oscillations and Congested Ports
When I was studying for my Private Pilot certification, I learned about phugoid oscillations. Most airplanes that are disturbed from level flight will go through a series of diminishing oscillations until they reach level flight again (if no controls are moved and the trim isn’t changed).
An aircraft that will eventually stabilize itself from minor deviations has aerodynamic stability. Most aircraft are built to be aerodynamically stable. If the pilot stays hands off, the plane will right itself from minor deviations.
Supply Chain Oscillations
We may be seeing something akin to phugoid oscillations in the congestion at ports. Port congestion is peaking again in California and is also building on the east coast.[1] California port congestion last peaked in the first quarter. The congestion was eventually capped by vessel supply. As those vessels were delayed in their normal rounds, other temporary vessels have been added. Now there is another round of congestion building.
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What If We Forgot to Ask What If?
With Easter being last weekend, I thought of an old story about what happened after Jesus returned to Heaven. Some angels asked about the plan to continue his work on earth. What would happen if the few disciples he had trained failed to continue his work? Jesus said, “I have no plan B.”
I heard this story used to teach Christians the importance of evangelism. I’d like to apply it differently. My point today is if you are the all-knowing, almighty God, then you don’t need a plan B. The rest of us need to plan for uncertainty. We need Plan B, Plan C, Plan D, etc.
My wife says when you are watching a scary movie, to be alert when things seem resolved and there is nice music, because something bad is about to happen. Isn’t that kind of like how supply chain is?
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Planning with Uncertainty
“Guests, like fish, begin to smell after three days” is an adage attributed to Benjamin Franklin. Today we might adapt that old adage to say something about demand disruption. We are still dealing with so much demand uncertainty even several months into the pandemic, and that stinks like old fish! And there is no end in sight.
No matter what industry you are in, demand uncertainty has moved in and isn’t moving out any time soon. Many industries are seeing lower demand and huge uncertainty, including anything to do with away from home eating and entertainment. For example, the continued daily uncertainty about restaurants being opened or closed complicates planning for foodservice suppliers, suppliers of suppliers, and growers.
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The Great Sequestration
Yesterday the President of the United States extended nationwide social distancing guidelines for another 30 days. Our lives and our supply chains are disrupted not only by the pandemic, but also the resulting Great Sequestration. How should our supply chains adapt to these times and prepare for what comes next?
As most everyone else is, I am sequestered at home, washing my hands frequently, and just going out for essentials. While I’m sequestered, I’m also thinking about how this is going to impact the companies and industries I regularly work with. Not only how to manage the current disruption, but also how to prepare for the future.
After being in touch with multiple clients and industry organizations, I see three essential components to success when coming out the sequestration. It doesn’t matter whether you are in Senior Management, Demand Planning, Supply Planning, Procurement, or anywhere else in the supply chain, these three things will be essential in how well you weather this crisis.
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