Optimization is not the only algorithmic tool that supply chain companies need to solve their planning and decision-making problems.More May 2, 2019
Beat the heat: Overcoming extreme, unexpected events in your supply chain
Author: Michiel de Neef
The weather has been a “hot topic” in the news recently, as temperatures in various countries across the globe – from Asia to Europe to Africa to North America – have soared to all-time highs. In the Netherlands, where I’m based, we experienced a blistering heatwave last month that shattered record highs in numerous cities across the country.
This protracted period of unprecedented, unexpected heat has had a major impact on many companies here – particularly those in in the retail, services, and manufacturing sectors. The extreme temperatures have triggered spikes in demand and shortfalls in supply for certain products (such as ventilators and ice cream) and services (such as maintenance and repair services for manufacturing equipment) and corresponding capacity and supply issues (such as inventory, raw material, and workforce shortages).
For example, let’s look at the impact of the heatwave on the supply chain of air conditioner repair service companies in the Netherlands: The skyrocketing temperatures have caused a large number of air conditioning units to break down, which in turn has led to a sharp increase in demand for repair services. Although air conditioner repair companies would no doubt like to simply increase their capacity to fulfill this demand, many are unable to do this as they are facing numerous constraints such workforce shortages (especially with many employees on holiday during the summer months) and lack of spare parts availability.
Indeed, the sudden, significant fluctuation in demand and supply patterns triggered by the heat wave has wreaked havoc on many companies’ supply chains, and many firms find themselves scrambling to meet demand.
So the key question is: what can companies do to prepare for and cope with unexpected events such as the recent, record-setting heat wave?
And the answer to that is: plan for the future and be ready and able to anticipate and handle anything – even the most extreme and challenging circumstances.
To be clear: I’m not suggesting that companies run their companies based on these unlikely or unforeseen scenarios, stockpiling raw materials and inventory and saving capacity – as this would all result in higher costs.
Here’s what I would advise companies to do: invest in an intelligent, automated supply chain planning and optimization solution like ICRON, which will give their planners and key stakeholders the capability to plan in the most proactive and profitable manner possible and make the best strategic, tactical, and operational decisions to optimize their resources and capacity – in any eventuality.
So how, specifically, would supply chain companies have been better equipped to handle the recent heatwave with algorithm-based supply chain planning and optimization solution?
Well, firstly, their planners could have sat down earlier in the year and conducted scenario analysis – essentially asking “what if we have a heatwave”? With ICRON, which has robust scenario-based planning and analysis capabilities, users can effortlessly create and explore numerous “what-if” scenarios to determine the best course of action in any circumstance and put an optimal plan in place to be perfectly prepared in case the unexpected occurs.
Then, when the actual heatwave hit, these companies would have had far greater supply chain agility with an advanced planning and optimization platform. They would have been able to dynamically and optimally replan – taking into account all of the supply, inventory, and capacity constraints caused by the sudden, severe weather conditions – to ensure their operations would continue running smoothly and they would be able to satisfy surging demand while managing their workforce and resources and controlling costs. Or support yielding decisions, as – during a market shortage – consumers will buy almost anything at any price.
With a best-of-breed intelligent supply chain planning and optimization solution – employing scenario-based analysis to prepare ahead of time and a powerful optimization engine that drives ongoing, optimized planning, decision making, and execution – companies can “beat the heat” by overcoming the impact of unexpected events and disruptions and extreme supply chain volatility.