What do volcanoes, earthquakes, radiation, freedom, and crude oil have in common? All of these forces have recently blended into a witch’s brew of nightmares for the global executives and planners responsible for ensuring that food, clothing and goods reach hungry populations across the globe. In this context, Sales and Operations Planning (S&OP) has never been more prescient.
When the now infamous “Eyjafjallajökull” (that’s aya –full–a–yokol!) volcano in Iceland blew up just one year ago, global supply chains were disrupted in previously unimagined ways as air cargo routes across Europe were shut down. For example, one Steelwedge customer – a Silicon Valley-based high tech manufacturer – suddenly faced a shortage of a key chip that had been flown in twice a week from Switzerland. Fortunately, this company had a relatively mature, technology-enabled S&OP process (driven by Steelwedge of course!) that allowed them to analyze and develop contingency plans involving shifting demand to alternative products, adjusting prices, moving inventory, and changing safety stock levels.
More recently, Tunisia became the first domino in the drive toward freedom across the Arab Middle East. We soon found our clients frantically making contingency plans in case the Suez Canal – a critical passage made by global shipping over 21,000 times per year – closed. Fortunately, while protests erupted along the Suez Canal, operations were not impacted and the people of Egypt’s drive toward freedom proceeded as smoothly as could have ever been imagined. Next Libya erupted, and soon oil prices were spiking as concerns mounted about a potential shutdown of Libyan oil production coupled with more chaos and violence.
Then just as everyone thought nothing more could possibly happen, the unimaginable happened. A phenomenal earthquake, tsunami and nuclear crisis injured the world’s most prosperous and efficient nation… and it keeps getting worse. Today, major global shipping companies are saying they will not allow their large container ships to enter Yokohama and Tokyo due to radiation concerns. Incredibly, these two ports represent 40% of all Japanese trade. A shutdown of this sort could never have been imagined.
To date, a number of our clients have developed “Japan Supply Chain Crisis War-rooms.” Sales and operations scenario planning challenges have now reached a new level! I was recently working with one of our clients – a global supplier of industrial machines with a dominant market share – as they struggled to adjust their demand and supply networks in response to the shutdown of several of their most critical Japanese suppliers. In some cases, not only their primary but also their alternate suppliers were completely wiped out by the tsunami. Never have we seen the Steelwedge S&OP system exercised more intensively and in such a compelling manner.
Recent events have once again proven that in today’s fast paced, volatile global economy, a disciplined, technology-enabled Sales and Operations Planning (S&OP) scenario planning solution is a requisite for survival. To quote Winston Churchill: “Let our advance worrying become advance thinking and planning.”
~ Glen Margolis, CEO
