27 May 2011
Almost a year to the day since volcanic ash impacted dramatically upon the ability for supermarkets, manufacturers and wholesalers to fulfil urgent customer orders - the Icelandic volcanoes have erupted again. This has caused concern that the ash will once more cause chaos - and has already started, with thousands stranded at airports.
The panic that has gripped businesses is surprising; I hope that most have learnt lessons from last year's volcanic eruptions and put contingency plans in place. Sadly, natural disasters and extreme weather are not exceptions anymore, and businesses need to be prepared to react accordingly, with flexibility to adapt quickly within their supply chain.
This could mean putting into place alternative transport options, for example if the ash impedes upon air freight, then items can still be sourced through other modes of transport. Measures could also include deciding to store products in multiple locations to minimise risk of shortages, or holding more inventory within the supply chain to absorb any disruption for a temporary period.
Businesses who may be caught out again are those who have adopted very lean supply chains and reduced strategic as well as the operating buffers in the supply chain. Although reducing waste and unnecessary buffers is highly desirable, lowering total costs, it can prove significantly more expensive when inventory is unavailable.
An efficient solution is to develop more accurate requirement plans which conform to lean principles as well as buffering the supply chain from risks and potential emergency situations, such as the ash cloud. Inventory planning should be optimised, and volatility risk in supply as well as demand variation considered as important factors when determining lean levels.
With more accurate forecasting, businesses can manage their supply chain more effectively to react quickly to changing circumstances, minimising the risk of the business grinding to a halt in the event that transport networks are paralysed.
Ultimately, businesses that are prepared will better weather the ash cloud. In the next few weeks we'll see who has learned lessons from last time, and who hasn't.