How can a supply chain react to unexpected events (similar to Michael Jackson's death)?

Filed in archive Point of view on July 5, 2009

The death of Michael Jackson shocked many of his fans but also the company which was organizing the event. In a podcast by New York Times, I heard that the unexpected death has resulted in $150 million loss for the organizing company.

This is clearly an example of an event which is hardly predictable; now the question is that, if we look at world of supply chain we see that there are many events with similar charactaristics (unpredictable): Natural disasters like storm in New Orleans some years ago, the political conflicts in some Latin American countries, etc.

The main question here is: How can we react to these unexpected increase or decrease in our products' demand? Well, here are some ideas and I appreciate if you can help me complete the list:

- Use the real-time communication tools which transmit demand data to supply chain departments: Kinaxis and some other vendors offer such solutions; the main issue is integration with other legacy systems but this is getting better.

- Postponement strategies: This is less technology related; postponing the final assembly operation of customization of the products for local markets reduces the risk of ending up with too much or too less irrelevant invetory. Companies such as Bentton started using such techniques more than a decade ago and benefited a lot from using it.

- Diversifying suppliers: Using different suppliers in different countries helps us to scale up and down easier and if an economic downturn occurs in one part of the world, the risk and our supply base drying up is less.

What do you think should be added to this list?