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Supply chain management January 10 www. bus- ex. com 13 Continuous Natural disasters, customer bankruptcies, product recalls... there are dozens of unexpected events that can wreak havoc on your worldwide supply chain. Are you prepared to react swiftly to these contingencies? A continuous supply chain design process can help you to succeed when faced with even the worst ' what- if' scenarios, says Hal Feuchtwanger N early every major retailer, manufacturer and distributor has learned the value of comprehensive long- term supply chain planning. Whether they are looking at a two, three or five year horizon, most executives can tell you what they expect their supply chains to look like in the future. They have top- level financial goals, as well as detailed plans for constructing new facilities, broadening their distribution networks, partnering with new suppliers, launching innovative products and other key supply chain activities. But what happens when these carefully constructed plans go awry? Is the average company equipped to succeed in the face of a severe supply chain disruption such as a hurricane, work stoppage or transport shutdown? What about the dramatic demand falloff caused by a product recall or a game- changing competitor innovation? design supply chain

14 www. bus- ex. com January 10 While many businesses have a firm grasp on their overall planning process and have a clear direction for the long term, few companies are adequately prepared for the short- term contingencies that can devastate even the most robust supply chain organisation. Continuous supply chain design is a new concept that is emerging to help companies succeed in the face of the unexpected- creating an ongoing, flexible capability to design the supply chain around both long- term goals and short- term realities. Just as every business has a unique supply chain, every company will have a specific set of ' what- if' contingencies that have the potential to disrupt operations. But some threats are universal, including: . Natural disasters, which have the ability to physically devastate any part of the supply and distribution network. . Product recalls, which can destroy consumer confidence and slash demand not only for the affected manufacturer, but for every manufacturer and retailer in the category. . Transport roadblocks, such as the 2002 West Coast port closures that brought thousands of US businesses to a standstill. . Customer bankruptcies, such as the recent Circuit City closure that dramatically affected many consumer electronics manufacturers. . Terrorist attacks and political unrest, which can impact both supply and distribution facilities, as well as national transport systems. . Dramatic changes in currency exchange rates, which can mean the difference between profit and loss. Even a development that seems positive, such as a wildly successful new product introduction, has the potential to turn the supply chain upside down if an organisation has not prepared for it. Is it really possible to prepare for these kinds of contingencies- and ensure that the supply chain maintains a high level of performance? Thanks to increasingly sophisticated technologies and associated processes, the answer is an unqualified ' yes'. A truly catastrophic event will certainly bring short- term disruptions, even for well- prepared companies. But, as demonstrated by some supply chain leaders, effective up- front planning can minimise these disruptions and quickly bring the entire organisation back on track. The first step is one that your business has most likely undertaken already: preparing a well- detailed supply chain plan that defines your organisation's future direction. Assuming all goes as expected, what will your supply chain look like in two, three or five years? Your supply chain design should define the future scope of your facilities and the shape of your distribution network, as well as include detailed plans focused on sourcing, inventory, new products and staffing levels. Of course, this supply chain design will be based on your organisation's projections about overall and regional demand levels, growth projections for specific customers and the likely actions of your primary competitors. As the earth has flattened and both offshore sourcing and international customers have become more prevalent, the supply chain design process has become much more complex. Are you allowing enough lead time to ship products from around the world? Is product inventory optimised to match demand and distribution in every local market? With so many suppliers and customers to consider- often spread across the globe- designing a supply chain plan to support your organisation's long- term vision under a best- case scenario can be a daunting task. Even more intimidating for most companies is looking past the best- case scenario- and designing a flexible, responsive supply chain that can weather any number of contingencies. With so many possible threats, ranging from random storms to carefully planned acts of terrorism, how can the typical company expect to consider, and plan for, every possible disaster? The answer lies in a company's basic philosophy of supply chain design. Instead of viewing design as a one- time event, or an annual planning exercise, today's planning leaders are taking a continuous approach to supply chain design. In a volatile business world, it is becoming imperative to design- and redesign- the supply chain on an ongoing basis to reflect both the newest dangers and the emerging opportunities. Companies should use their long- term supply chain plan as a starting point, then begin to ask themselves what they would do if various contingencies were to occur. They need to consider the impact of a number of threats on various critical components of the supply chain, including: . Sourcing plans, which can be thrown off by extreme weather, political unrest and other events that take place across the global supply chain. Even changes in currency rates can suddenly make an entire group of suppliers unprofitable. In today's fast- changing world, companies need to take an ongoing look at their network of suppliers, modelling the effects of any disruptions on the overall sourcing plan. . Inventory levels, which need to be continuously optimised against long- term business objectives, changing market conditions and supply constraints- as