The “Frankenstorm” Hurricane Sandy is an example of how quickly a change in weather can become a business disaster. Employees are absent, production comes to a grinding halt, and essential components are stranded several hundred miles away. Companies that rebound quickly have implemented strategies to allow them to manage more effectively when well-oiled processes are unhinged.
When the work-force has been depleted, essential processes are still accomplished when employees have been trained in more than one role. Some employers find it helpful to rotate their employees through several roles. This helps to ensure business continuity, makes the work environment more interesting for employees, and creates a forum for discussing new ideas.
Companies that rebound quickly have standardized component parts across their product lines. Custom designed components can shut down production when transportation is delayed. Having too many of these components in inventory can be costly when designs change.
Although it is important to differentiate products to satisfy target market segments, customization should be accomplished as part of the production process. When inventories are depleted, as many different products as possible can still be produced from basic parts.
Along with standardization comes the ability to move capacity from one line to another or from one plant to another. When production has been halted in one location, another can pick up some of the slack to keep distribution balanced and the fill rates at an acceptable level.
Distribution Requirements Planning
Which locations receive shipments when the demand outstrips the supply? This is a complex question which is often addressed subjectively and inconsistently. Companies that have implemented a strong DRP system have the ability to determine shipment sizes, locations, and customers objectively and quickly based on shipment availability, lead times, and customer demand.
There is always room for unpleasant surprises. Some companies hedge their production by investing in higher inventories. Smart companies find ways to adapt.
This post was contributed by Janet Hintz, a Director with Vonya Global. Janet is a seasoned advisor, focused on helping her clients find alternatives that align financial and operational objectives, increase productivity, and strengthen internal control. If you would like to contact or connect with Janet directly you can find her profile on LinkedIn: http://www.linkedin.com/in/janethintz.