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© 2009 TMSi Logistics.
They could jump up to previous highs—or higher—
without warning and for no particular reason. Today’s right
answer can easily become tomorrow’s financial albatross.
And a solution predicated on $150 oil may look like a self-inflicted wound when prices drop.
The crux of the issue is that prices—driven by demand,
speculation, and frivolous machinations by producers—are
likely to continue to yo-yo. So, what’s the sensible course?
The certainty of a solution that looks superficially bad, or
the uncertainty of a solution that’s sometimes excellent and
sometimes horrendous?
What’s your tolerance for cost uncertainty—and what is
your management’s? What customer and service impacts
are probable in an uncertain sourcing and transport world?
And how might those uncertainties affect customer loyalty
and retention?
Tugging on the supply chain
We tend to think of these issues in terms of manufacturing,
but their impact is far greater in scope. As supply chain
managers, we are going to be tagged with much of the
responsibility for how they are handled.
Today’s dilemma hits the sourcing function squarely
between the eyes: Where to go? If, when, and how to come
back? And where to come back to, if at all? All with cost
consequences that can make the benefits of years of supplier cost-reduction initiatives disappear overnight.
That doesn’t even begin to consider the time and cost
implications of marine transport from Asia versus the
Caribbean Basin. Or the need to get product from point of
entry (either water or land) into a rational distribution network. Both of these add time and cost factors that didn’t
even figure into the equation back when the goods were still
made in the USA.
Then there’s the critical question of whether—or not—
distribution centers are both correctly placed and correctly sized to handle whatever the latest solution is. With that
comes a set of decisions regarding capital requirements to
meet new demands—or a re-evaluation of the role of
logistics service providers in the new model (along with
their ability to change as fast as the next solution
emerges).
Supply chain managers have always been somewhat at
the mercy of factors beyond their control. Once upon a
time, though, you could expect that variation would lie
within a somewhat predictable range. With the evolution of
global competition for finite resources, that has changed
forever. ;
Art van Bodegraven, practice leader at S4 Consulting, may be reached at (614) 336-0346
or avan@columbus.rr.com. You can read his blog at http://blogs.dcvelocity.com/
the_art_of_art/. Kenneth B. Ackerman, president of The Ackerman Company, can be
reached at (614) 488-3165 or ken@warehousing-forum.com.
