Supply can be fickle
As the global economy recovered from the Great Recession, companies recovered slowly. Wary of the hangover of excess inventory and capacity, executive leaders looked for ways to do with less, building less inventory.
This wasn't just sleight of hand logistics maneuvers like postponement, or multi-tier networks. Companies that represented excess capacity closed their doors. No industry making or moving physical goods escaped the trimming of excess capacity. The pendulum of supply moved, and companies worked to reduce the inventory they carried in raw and finished goods.
The US oil and gas industry grew and did something that nobody expected, turning the United States into the largest oil producing country in the world in 2018. Investments moved to fund the drilling, production, collection and transport assets to extract the oil. Wall Street invested in hundreds of tank car unit trains to move crude from the Bakken fields to thirsty refineries. The pendulum of supply moved to abundance, driving global oil prices so low that many of the investors who dove into the US shale oil market lost huge sums of money.
Markets swing back and forth - the pendulum of politics, capital, social unrest, weather, natural disaster, all play with the supplies of our carefully planned chains. It may appear that Mother Nature hates your supply chain, but frankly, Nature doesn't even think about your supply chain. You, as the supply chain manager, are respo0ncible for managing and mitigating the risks. All the risks. A truck has an accident - how do you recover? How about keeping the plant from burning down? Did you choose a single source for a key component for millions of dollars of product?
Supply can be fickle because there is not enough of it, or it is in the wrong place, or it is suddenly poisonous, as in Romaine lettuce with E coli. We didn't know where it came from, so the grocery industry destroyed thousands of tons of lettuce over the Thanksgiving holiday week in 2018. That outbreak took weeks to trace to California farms. A month before, three large US grocery chains removed over 100,000 packages of processed salads due to Listeria found in a single ingredient, corn.
Supply can be fickle because there is too much demand. As demand rises, prices go up. As superior products sell first, fastest, and for the most money, inferior products become new supply, often for the same price as the premium was. The inferior products create problems in industrial processes, creating waste, lowering quality, and increasing costs.
Supply is always exposed to risk. Competent managers recover when things go wrong. Superior supply chain managers look for the risks and work to mitigate or remove them.
Articles in This Series
Lessons & Stories
Can Meat Be Too Cool? Part 1
You may have noticed signs in the grocery store meat department announcing that the chicken is a product of the US, and that the beef may come from Canada, Mexico, or the US. Look at the price label on the next package of ground beef or steaks you pick up in the meat case. You may find that the label carries the same Country of Origin information on the label. Protein of all kinds, including fresh, frozen, and processed beef, pork, poultry, and seafood, must comply with COOL regulations in the US.
Country Of Origin Labels — COOL for short — became mandatory in March 2009 after years of debate between the government and various food industry groups. Both US Farm and consumer groups support COOL because it helps consumers to be better informed about where their food comes from. While the animal producers and consumer groups supported COOL, the processors in the middle of the food supply chain fought the measures because of the additional cost and effort involved in tracking the Country of Origin (COO) of each animal from carcass to final cuts and grindings.
Can Meat Be Too Cool? Part 2
Country Of Origin Labels — COOL for short — became mandatory in March 2009 after years of debate between the government and various food industry groups. Both US Farm and consumer groups support COOL because it helps consumers to be better informed about where their food comes from. While the animal producers and consumer groups supported COOL, the processors in the middle of the food supply chain fought the measures because of the additional cost and effort involved in tracking the Country of Origin (COO) of each animal from carcass to final cuts and grindings.
The National Farmers Union praised the rule change as an “excellent response.” NFU President Roger Johnson said, “By requiring further clarity in labels and stronger record-keeping, the set of rules released are a win-win for farmers, ranchers, and consumers.”
Mother Nature Hates Your Supply Chain
So remember last year how a volcano messed up air travel for the EU?
It is happening again.
So far this year Mother Nature has been really tough on supply-chain managers. And it is only May. This is a clear reminder that man can plan like hell, but at the first point of contact those plans go to hell.
A Recap of the Fun:
January: Atlanta gets a big snowfall. The South stops moving for a few days. Flights stop. People are stranded. I attended a conference a week later in Atlanta, and the staff who put on the show—all local—were still walking around in a little bit of a daze, albeit in great spirits. The airlines have contingency plans to cover these kinds of events, but still… when one of your major hubs sees snow like in the photo to the left, your network system is going to be a mess for a few days.
The bottom line is, you can still dig out of snow, even if you don't have the equipment to do so ready at hand. You may not have plow,s but front-end loaders work just as well. And in the Southern States, there may be warm weather the following week, which always helps.
Mother Nature Still Hates Your Supply Chain
So you were hoping to buy a new computer for Christmas this year? How about one of those handy-dandy backup disk drives? Have you seen the prices on those lately? Well, guess what? Be prepared to pay up.
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