Exploiting Supply Chain Variations

While no Supply Chain professional likes Supply Chain variations, in reality Supply Chain variations is the only certain event of a Supply Chain. Supply Chain variations should be viewed positively to make the most of them.

I personally believe that a system which is stable for a long time develops fragility. Over a period of time the basic immune system to handle variations gets completely eliminated hence when the variations occur, the Supply Chain system is not equipped to handle the variations. So some level of variations in Supply Chain is actually good. They keep the system well greased and oiled. Predictability kills and probably does it faster. As a Supply Chain professional if variations have occurred, I think, it gives a great chance for the professional to go back to the drawing board & redesign. e.g. If, in your Supply Chain, you never had shortages of material, it indicates a great Supply Chain for a practitioner. But for me, it represents a Supply Chain where underlying process issues may be hidden. Like any delay in Purchase Order processing might have been eliminated by the buyer sharing the P.O. with the Supplier before its system approved thus covering for the process inefficiency. BUT the fact is material always arrived on time, the Supply Chain had no variations. Question is - Is that a good Supply Chain? I think once in a while a material shortage is needed. That variation will create a context to undertake Root Cause analysis which then will expose the process inefficiency. Probably, in the case above a junior buyer was exposing the Supply Chain to a larger risk (e.g. in case of schedule changes what will the buyer do with the material which the Supplier has already produced basis the "under approval" PO which was shared?) which now can be fixed with a RACI matrix where the hierarchy which approves the PO is equally responsible to complete its tasks on time to avoid delays. Variation thus lead to a better Supply Chain.

In some of my engagements what I see is that to avoid variations, professionals create buffers. But the reality for me is those buffers actually cost more than there benefits AND I am not only pointing to their "financial" costs. e.g. Buffer in the form of Inventory leads to additional Carrying Cost. This is well understood and appreciated. My point is do  buffers really dampen variations? Or with buffers does the learning curve of the Supply Chain improve? I think with buffers, one may dampen variations but will cause a permanent damage to Supply Chain thinking. e.g. Buffer in the form of "Safety Stock". For a long period your Supply Chain had no issues with availability hence the Safety Stock was never consumed. It looks like a perfect Supply Chain as it has no stable material availability, no worries with demand changes as material was always available when needed. In all probability, as availability was not an Supply Chain issue, the practitioner doesn't feel the need to review & update the Inventory system hence the "safety stocks". This takes away a probable chance to review the system and optimize the "safety stocks". And if at all there is pressure to reduce inventory, taking away safety stocks seems to be a reasonable thing as there was a stable material availability all the time. The moment safety stocks are taken out of the system, variations increase. As a Supply Chain, you were stable for so long that a minor variation can lead to a chaos. In short, exploit the variations to make the system better.

With a dampened variation, things look under control WHEN actually they are getting worse. Taking a cue from a real life example, when employee of an organization is contrasted with  an independent (freelance) professional, the employee has a stable performance of his income while the independent professional may have higher amplitude of variations. There may be times, when the independent professional may have peak demand for his work while there may be days when he is completely idle with no work. Where as an employee always has stability as he has a neatly planned schedule for his work days as well as his holidays. His pay cheque hits his account periodically with a great deal of certainty. For a moment it looks like being an employee is a better choice as compared to being independent professional. BUT what happens on a Friday afternoon when you get handed over with a pink slip? Suddenly the "stable" has lost its orientation. As an employee he probably didn't think of upgrading himself and even if he thought he had no time and when the news arrives his ability to "absorb the variation" is found to be very low. Now compare it with the independent professional. In the first place, he is acclimatized to variations in income, psychologically he is tough than the employee and also over the period, the time when he was with no work he utilized it to gain new skills, learn new things and probably is much more skilled at the present moment than the employee who just lost his job. So the independent professional exploited the variations to his benefit. Compare this example with any of your Supply Chain experience AND now you know the importance of "Exploiting Variations"!!!