More rigorous supply chain standards championed

Analysts and industry leaders believe that hoc strategies such as drawing down inventory stockpiles are poor substitutes for proper supply chain continuity planning.

In the wake of the recent earthquake and tsunami in Japan, companies are struggling with numerous supply chain disruptions from lack of raw materials to damaged facilities to missing personnel noted Dr. Jeff Karrenbauer, president of INSIGHT, Inc.

“Infrastructure has been severely compromised in Japan which, in turn, impacts the ability to both manufacture and distribute,” he said.

“Even if companies have stockpiled parts, it will be a long time before product flow is back to normal in Japan, so these inventories will eventually be depleted,” he said. “Therefore, companies need to have a strategic supply chain plan in place that mitigates the impact of disruptions. Possible components of the plan include inventory positioning, alternative sourcing, transportation options and so on.”

“The typical reaction of management,” said Karrenbauer, “is to ask the staff to prepare some spreadsheets and perhaps monitor some KPIs in a BI (business intelligence) system. Wrong on both counts. There is not a spreadsheet in existence that can handle the complex interrelationships inherent in global supply chains and BI systems are chock full of simplistic ratios and performance ranges that are useless when it comes to professional contingency planning. Serious prescriptive analytics are worlds removed from descriptive tools.”

Karrenbauer, noted that analysts from Bank of America Merrill Lynch, report that the Japanese earthquake will result in at least four to six months of disruption to the world’s technology supply chain.

“Technology makers on average have four to six weeks of inventory, he added, which won’t be enough to span the recovery. Technology analysts say the most persistent worry for digital device makers is the supply from Japan of NAND flash — the lightweight storage chips used in smart phones, tablet computers, digital cameras and a variety of other components.”

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