STEP ONE: Get control of your lead times (and reduce them)
In order to manage the wild swings in demand and supply, you’ll need to reduce the time to replenish stock, so that you can react quickly to fluctuating demand. A good way to reduce lead times, aside from improved supplier arrangements, is to automate. Be careful what you automate though, a level of predictability is needed for automation not to exacerbate the chaos. Your transaction and master data will also need to be accurate.
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STEP 2: Ensure your stocking strategies reflect your new reality
In order to alleviate the pain caused by shortages in supply, you will need to revisit your stocking strategies, particularly of your critical inventory. Once that’s done, be sure to update your MRP settings inside your SAP system to reflect your decisions.
REMEMBER: Now that you’ve reduced your lead times, you can most likely keep less stock.
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STEP 3: Set up stock swim lanes
Group your materials into swim lanes, (or buckets or boxes) that allow you to easily find your SKUs inside your SAP system - especially the critical ones. With this in place you’ll be able to use your standard reports for quick visibility of inventory performance and demand and supply imbalances for your essential inventory.
STEP 4: Check demand and supply balancing – every day
With accurate data and swim lanes in place, you'll need to introduce daily supply chain monitoring that encapsulates “The Three Rs”: Rhythm, Routine and Real-time processing.
- Rhythm: A set time of day, every day, when your supply chain staff connect to ensure today's work will be done today.
- Routine: The steps and structure you will follow to ensure adherence the rules.
- Real-time Processing: Ensuring you data always reflects your current reality.
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STEP 5: Performance manage your inventory
It is going to be difficult to rely on your historic stock and supplier performance, during a Black Swan event. While you may have trusted your inventory levels prior to a supply chain disruption, even if it was that there was more than enough, it may be challenging to get back to those levels any time soon. Inventory owners are going to need to keep careful track (at very least, weekly) on how inventory is performing. The upside is that they may be able to avoid stock spiraling out of control again.
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During challenging times, look into your SAP system to find the reports that will give you information to better navigate Black Swan Events. Most of these reports have been around since SAP R/3 days (and are still there - even in S4). If you click through the related blogs in this article you'll get tips on where to find them.
Black Swan Event definition (Lexico): An unpredictable or unforeseen event, typically one with extreme consequences.
Originally published on May 06, 2020
