Global supply chain management the bankers' way...

Filed in archive Point of view on September 29, 2008

Almost all the supply chain expert agree that supply chain network design is a necessary task for optimizing the total cost given th volatility of the elements such as gas prices, labor cost, taxation and so on.

If we take a closer look at what really network designers do when conducting their optimization work, they really take an approach like bankers do in the time of decision making for investments. Just as investors hedge against future market uncertainties, supply chain managers hedge against upheavals that could impact the performance of their networks (e.g. energy cost, labour, etc.).

The approach usually adopted in such efforts is simulation. Using software like LogicTools or i2 Strategist or similar packages, the experts test how a hike in fuel prices indicates the relative sensitivity of different parts of the value chain.

The results of such sensitivity tests help managers make supply chain investment decisions. They may know clearly thereafter, which is the safer scenario and what type of supply chain configuration optimizes the cost in the long run. The only difference which such analysis might have with the practices in banking sector is that it might lead to a better and secure future...:)