Throughout the past 20-plus months, no single individual, world-wide, cannot say they haven’t been impacted by volatility and disruptions within their personal or professional lives. For those of us within supply chain roles, we’ve faced these challenges often and even been taken back by the severity of these times. While our experience in the industry has prepared many of us for the supply chain bullwhip, the Corona-Whip is one we will not forget, as it’s truly changed the way each of us will respond moving forward.
Supply chain professionals have dealt with the bullwhip effect that swiftly comes and goes frequently. The bullwhip effect is known to cause both shortages and overages to businesses due to inaccurate estimations of consumer demand, which is typically driven by fear of the unknown or panic buying. When this occurs, the figurative “bullwhip” force begins to manipulate each layer of the supply chain, both internally and externally.
The “Corona-Whip,” as this event has been termed, hasn’t been any different – it certainly caused erraticism. The difference in this bullwhip is that it had extremes not seen since the Wall Street Crash of 1929s, which many of us have only heard about but not been faced with managing through. As with the Wall Street Crash, there were huge spikes in demand on random unprecedented products all at the same time: paper, cleaning supplies, grocery items, and medical products saw increases world-wide while jobs saw a significant loss at the same time. This was followed by a fear of scarcity that magnified the amplitude of the prior spike in demand.
As with all bullwhips, until supply catches up with demand or demand transitions to substitute items, the bullwhip continues throughout the supply chain. The effects of the bullwhip are overproduction, excess inventory, and ultimately severe consequences for the business as customers seek to find alternatives who can serve their requirements.
Recommendations for the Supply Chain Bullwhip
As we all begin transitioning into a new “normal,” it’s important for supply chain professionals to consider how to prepare for a future of additional unknowns. The following recommendations can be used as you begin refreshing your business and supply chain strategies: 1. Evaluate, 2. Gather, 3. Plan, 4. Simulate, and 5. Communicate
Evaluate: Using the past period, evaluate what worked and what didn’t for your business and supply chain related to meeting your customers’ requirements. Identify the steps taken to solve constraints. Were there new processes you added? What value did these activities bring? Should they remain or only be used during times of crisis? Incorporate these learnings into your business risk plan and your updated supply chain strategy.
Gather: Facilitate discussions focused on gathering feedback from your suppliers, customers, and internal team on what has or hasn’t worked and their recommendations for improvement.
Plan: Developing a new plan is important once this information has been gathered. The plan should incorporate what has worked, what could have worked, and what not to do, along with the why behind each of these separate categories. Including the “whys” into the plan allows for everyone — both currently and in the future –to clearly understanding what went into the development of the plan, what has been tried in the past, and why certain strategies or ideas succeeded or failed. All of this is important in times of stress as well as in higher levels of transition within organizations.
Simulate: This step is often overlooked. However, as many of us have witnessed throughout the pandemic, the ability to simulate various scenarios could offer insights for solving the immediate along with future circumstances. Becoming aware of the risks we are facing or could face allows the organization to prepare a risk mitigation and supply chain continuity plan.
Communication: At the completion of these five steps, communicating the plan is very important. As seen through the past 20-plus months, there’s been a heightened awareness of how important it is to communicate both internally and externally to establish recommendations and to work through the challenges. Additionally, by sharing the plan, we bring about shared ownership, accountability, and support in times of volatility in the future.
Supply chain interruptions have been and continue to be a topic that remains at the forefront of conversations. The bullwhip will never go away; however, the actions we take now can help us prepare for the uncertainty of tomorrow.
Clarkston Consulting has experience in helping companies assess and evaluate their current supply chain strategy. We can also assist in gathering, planning, creating, simulating, and communicating your supply chain strategy and continuity plans.
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Contributions from Samantha Kaib