Recently as I crossed over the surging muddy red water of the Red River into the great state of Texas, I wasFlooding-in-Wells-008 reminded of how quickly things in life can change. Not three months ago Texas was in a critical level of dryness and drought that had persisted for most of the past 10 years. Of course, I started thinking how this natural change in the weather pattern provides meaningful parallels to the value of mathematics and analytics in supply chain planning.
As of June 1, 2015 some areas of the state are in dire need of flood recovery when one month ago the water level was tragically low. Beautiful lakes that had no open public boat ramps have now swelled into the flood planes, reinvigorating recreation, camping and all business related to life on the water.
Natural changes in the weather provide a great parallel to the study of uncertainty and volatility in business planning. In times of drought, controls for water conservation are enforced and after the rain they’re lifted. Does that make sense? Do we even know?
Compare drought conditions to periods of low demand such as off-seasons or an economic recession. Conservation programs such as watering restrictions match supply chain concepts like reduced replenishment orders, lower stock levels and extended service commitments.
Ideally (another word for optimally), excess water supply would be held in reserve and appropriately allocated in preparation for the impending hot days of the Texas summer. Solutions for storage like overflow reservoirs or transfer methods such as pipelines to feed below ground aquifers are costly and place significant demands on available resources.
Analytic tools allow us to assess not only the cost but also the inherent value of every potential alternative solution. For example, a pipeline costing $500 million to construct over a 5-year period may prove useful only 12 out of every 120 months. The relief provided is most likely too rare and too limited to substantiate the large investment of capital.
Without a detailed review, decision makers and the public at large may make uninformed decisions or support invalid claims. The same is true for strategic, tactical or operational supply chain planning decisions and the resulting business performance.
Decision support for every phase of the business cycle is critical. Decisions based upon averages or peaks and troughs are consistently inaccurate for the here and now. Many times what we did last week isn’t good for this week so thinking what we did last summer will work this summer is truly a risky position.
The analogy offered here has implications for effective planning — whether production, ordering and replenishment, or inventory target setting. Effectively managing the flow & throughput of your goods by establishing informed criteria for fulfillment in all channels gets you the most out of your invested resources.
Think about the power of establishing and maintaining consumption controls based upon current availability and any number of scenarios representing future availability. Making informed decisions today with tomorrow in mind results in better plans. Similarly, I would imagine the hydrologists at the Texas Water Development Board (TWDB) and the Texas Commission on Environmental Quality (TCEQ) are using sophisticated data analytics to plan our abundant water today for the coming dryer months.
On the personal side of the wettest May in Texas history… so far, the spring youth baseball season has been a wash out! I know Texas is first and foremost a football state but in the offseason the QBs are star pitchers, tight ends are digging out throws at first base, cornerbacks are running down flies in centerfield and linebackers are throwing out would be base stealers from the catcher position (and on and on if you’re picking up what I’m putting down). So, while we’re anticipating the start of football season, this is one awesome place to play a very competitive brand of baseball and we look forward to at least a little break in the rain!
Logistics are part of supply chains. The purpose of a supply chain is to do one thing – enable a company to grow. However, focusing only on transportation will reduce costs but invariably will cause issues in other areas.