Effective supply chain management strategies must be able to contend with any incident or development that crops up. For many companies, this winter's weather has given the robustness of their supply chains a run for their money. The so-called polar vortex, with its record low temperatures and massive snowfalls left few parts of the U.S. unscathed. In addition to prolonged cold snaps making generally chilly locales like Chicago and Detroit even colder, ice caused huge problems on several occasions in southern states like Georgia and South Carolina.
Most companies are accustomed to dealing with slight delays and brief sales fluctuations brought on by bad weather. However, as adverse conditions linger, they can complicate supply chain and order management strategies. This includes logistics and communication issues, as well as inventory and product availability issues spurred by weather-influenced consumer demands and shopping preferences. It already looks like March will continue bringing the chill to many areas in the country, according to The Weather Channel, so it's important to continue evaluating their systems and protocols for maximum efficiency, contingency planning and profitability.
Supply chain management concerns
Bad weather can complicate or derail many facets of supply chain management, no matter how extensive planning efforts are. If unplowed and icy highways make roads dangerous or snow buildup makes train routes hardly passable, transportation speed and time are going to be affected. A lengthy period in which there are far more stormy days than clear ones effectively reduce opportunities to small windows. Having to base arrival times, capacity movements and lead management on a highly unpredictable and hazardous force can make effective supply chain management seem futile, noted Logistics Viewpoints contributor Mark Derks. Among the other complications:
- Higher accessorial charges: Unused truck orders, raised fuel consumption and more stops mean higher costs.
- Delays with trickle-down effects: Each transportation or logistics delay will have impact those that follow it, creating scheduling issues, missed connections and overall system latency.
- Loss of competitive advantage: It is hard to pick up and move a warehouse during the winter. However, a competitor might be located in an area hit less hard or completely unaffected by a winter storm. Customers do not give much thought to a vendor's back-end supply chain, and will only care about a product that does not arrive on time. Without a centralized, well-planned supply chain management strategy, an organization risks falling behind a competitor that has more luck in its location.
"[T]he real question is, 'As a shipper with customer commitments, what can I do in an environment like this?' Derks wrote. "As demand skyrockets, it may be more important to choose providers that deliver the level of service you expect to ensure your products arrive as they should, giving your customers a competitive advantage despite higher costs. Timing is critical when it comes to looking at your strategy."
Shifting supply needs to another provider temporarily and restructuring freighting and service strategies can help an organization get through a period of adverse weather as well, Derks stated. Above all, companies need to remember two things: First, it's crucial to leave some leeway in budgets and resourcing for weather-related events. Fiscal and operational strategies that already stretch the supply chain to the brink will be less likely to accommodate changes. While it's difficult to predict the weather, it is possible to forecast the likelihood that something might happen.
Staying smart about order management
The second salient point to remember is that it's crucial to adjust customer-facing strategies in accordance with weather-related developments. While some customers understand that sometimes there is nothing that can be done, many others will balk at slow delivery or lower quality communications. This could lead to customer churn and even hits to a company's reputation. Airlines deal with this problem very publicly every year. Customers do not want to adjust their plans or their expectations for the weather, so it's important that enterprises do.
Stalled production can make it difficult for organizations to fulfill orders and eliminate backlogs. This winter's effect on manufacturing outputs was evident in the recent Manufacturing ISM Report on Business, according to Manufacturing.net. While the improving overall economy generally pushed growth in the manufacturing sector, bad weather took its toll on production. The ISM New Orders Index had a month-over-month increase of 3.3 percent from January to February, but ISM's Production Index fell to its lowest reading since May 2009. At the same time, inventories set a modern era record, rising 8.5 percent from January to February. This is caused by unavailability of certain parts, which prevent final products from being made and distributed. Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, ascribed this unusual combination to the effects of prolonged winter.
"The impact of extreme weather shows up this month mostly in production, which is down 6.6 and that looks very unusual in view of solid new orders, and a backlog of orders which is growing," Holcomb said, according to the source. "I think production was impacted by perhaps plant closings, the inability to get all of your workers available, plus the late shipments of certain raw materials. Backups in ports, hampered logistics and things of that sort is reflected in February's production numbers."
Putting order management strategies into action
Real-time, centralized order management can help companies avoid the pitfalls of substandard supply chain effectiveness. Without everyone on the same page, it is exceedingly difficult to contend with changes, weather-related or otherwise, that disrupt normal operations. Here are three ways order management benefits supply chain effectiveness:
- Connects disparate stakeholders: Keeping the lines of communication open is key to dealing with the weather. By using the same software and communication tools, supply chain members are better positioned to understand and anticipate concerns and collaborate on problem-solving.
- Directs orders with multiple variables: Using multiple location, time and condition variables makes it easier to manage orders and avoid unnecessary operational spending.
- Tracks performance with metrics: Measuring performance is important. That data may come in handy down the road the next time a company is confronted by bad weather. Having some history about supply chain performance in nontraditional contexts and conditions can help the enterprise develop smarter contingency and continuity plans.
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