October 2011 | Commentary | In Perspective

Reading the Signs 

Tags: Supply Chain Management

When forecasting the future, it's easy to be distracted by external indicators that sound significant. In supply chain management, indicators external to your enterprise, but internal to your supply chain, deserve your attention

According to an old saying, there are three types of opinion: yours, mine, and the correct one. In these troubled economic times, the opinion research business is booming as we all try to cut through the fog of bad news for a positive sign of recovery—or at least stability. The signs are there, although they often seem dwarfed by a new onslaught of negativism. It can be overwhelming trying to find that one correct type of opinion or forecast.

The correct forecast may be in your supply chain. In fact, I'll go out on a limb and say that, for you, it is. That's not much of a risk given that I just acknowledged that both our opinions will be wrong, but the opinion of our silent partner may be the correct one. Let's ask the supply chain.

The status of supply chain management has improved in many organizations as a result of the prolonged economic downturn and instability. That means the board of directors is listening, but it also means they want to hear answers. And they express some powerful concerns for supply chain executives.

What's driving your supply chain agenda? Demand variability is often the top concern of corporate executives. Predicting customer behavior and responding to customer demands has always been a difficult undertaking. That may be why good forecasters are in high demand with executive recruiters.

You can take a few steps to help get a handle on demand. With some good technology, collecting demand data is relatively easy. Demand data will help you meet changing customer requirements if your supply chain is agile enough to respond quickly to demand signals. The problem is, that's historical information and may not be the best predictor of future performance.

Visibility up the supply side of the chain, and the ability to respond, are also crucial to success in good times as well as bad. That visibility needs to extend further than the first tier of suppliers (though it may not be important to manage all the successive tiers directly). Requiring suppliers to have the same visibility as you are seeking will help ensure that what you hear and see in your supply chain is both accurate and timely.

When your supply chain starts to speak to you, and you are listening, obtaining results in the other top areas of concern expressed by supply chain executives—cost containment and reduction, and inventory management—won't seem beyond the reach of your supply chain.

When predicting the economic future, some news headline writers look for shock value, while other analysts seek to calm consumer fears and inspire their confidence. You will have an edge because you'll be listening to the one opinion that counts.

Your supply chain can supply you with a clear view of reality—good or bad. And that information will give you the ability to respond without overreacting.