Purchasing Insight

Purchase to Pay, Purchasing & Procurement Process, Electronic Invoicing

Browsing Posts tagged supply chain

Purchase to Pay, P2P and Dynamic DiscountingLean Manufacturing is not new. In the grand scheme of things, it has been about for no more than a blink of an eye. If it were not for Toyota developing the concept originally Lean Manufacturing would have been invented through another route. The fundamental foundation of Lean Manufacturing is information. Information about historic demand, about anticipated demand, inventory information, collaborative information, information that allows you to predict, with accuracy, your supply chain needs. And without global information networks, lean supply chains would simply not be possible in the 21st century world we have become accustomed to.

So what happens to a lean supply chain when a volcano erupts?

BMW was one of a number of manufacturer to find itself too lean to deal with Eyjafjallajoekull and with the return of the dust cloud to parts of Northern British Isles this week and expert predicting further disruption for the rest of 2010 perhaps it’s time to consider how to adapt supply chain strategies to recognise the risk of natural events.

This is a question that Carol MacIntosh asked last week  in The 21st Century Supply Chain blog – a question that she offered some answers to.

“I don’t think the answer is building more just in case inventory. In order to stay competitive supply chains have to be lean. (In fact, they are becoming even leaner with late stage postponement to satisfy increasing levels of customization on consumer goods.)” she writes.

Ask BMW if they agree.

The fact is that Lean works in a world that is predictable and as our ability to share and analyze data becomes more sophisticated, so we can become increasingly lean and deliver to customer demand such as customization in ever more sophisticated ways. But we don’t live in a predictable world.

Thankfully events such as Eyjafjallajoekull are rare, but responding by assuming that “there may never be another volcano that disrupts the supply chain” is arrogant. Lean supply chain thinking is barely two decades old – it is only just out of short trousers. Eyjafjallajoekull has been around a lot longer.

As the mass grounding of aircraft across most of Europe is about to enter its 5th day, the consequences to business of the major eruption of the volcano Eyjafjallajoekull in Iceland are just beginning to be contemplated.

The priority thus far has been to get stranded European passengers home. For some, it’s been a welcome extension to a holiday, for others a travel nightmare without precedent. But now the focus is moving to the economic consequences of the disruption to supply chains and the possible consequences of further disruption. Buyers and sourcing and supply chain managers across Europe are likely to be burning the midnight oil in the coming weeks trying to ensure that supply disruption is kept to a minimum.

The first consequence is likely to be a shortage of some fresh fruit and vegetables imported from outside Europe. Christopher Snelling, head of global supply chain policy for the Freight Transport Association, has been quoted as predicting shortages if the grounding continues. “There are no shortages yet, but we may start to see certain ranges affected if this carries on”

Global sourcing, low cost country sourcing as well as global labor arbitrage, all of which have been part of the sustained economic growth of the developed world over the last 20 years, all depend on reliable means of global transport. What the events of the last week has taught us is that local contingencies and risk management and mitigation in respect of global sourcing is crucial.