I'm currently preparing a presentation to be given at the European Supply Chain Council conference in Budapest in early October. The subject will be how to balance efforts to establish a lean supply chain with risk management. Indeed, in the process of making the supply chain truly lean, there is a danger to diminish the responsiveness of the value chain and as such reduce its capability to respond to an unexpected event.

So, the question really is how "lean efforts" can be balanced with risk mitigation while assessing the implications of the decision that has been taken. To do so, a clear understanding of how the supply chain operates is required. Gaining insight in what happens at suppliers sites is part of that, so they need to share information. And here is where the partnership, discussed in the previous blog, actually comes in.

Building Supply Chain Visibility consists in gathering data from the players in the supply chain for two purposes. First, detailed information allows a clear understanding of what happens at the moment itself. It provides data on inventory levels, material availability/shortage, cycle times, delays in production or transportation etc. This allows spotting potential problems, and initiating the appropriate response to the event, as established in the risk mitigation plan.

Consolidating the gathered data and maintain it over longer periods of time allows to gain understanding of the variances in the system and spot trends. This is really the basis for gaining a better understanding of how the supply chain operates and what its vulnerabilities are. It's those that risk management will have to address.

Mastering the capability to manage variance at the lowest costs is really the Holy Grail these days. It requires the deep understanding of the supply chain I discussed above, and a series of simulation tools to establish how the system reacts to changes. Nothing fancy is required, but a systematic review of the options open.

For example, when discussing with our supply chain team, we reviewed whether it was possible to address the fluctuation in demand by combining a stable, efficiency focused supply chain to deliver the bulk of the requirements with an agile one that would deliver the deltas. This requires the development of a flexible manufacturing facility that can build multiple models cost efficiently, recognizing that there is no way this supply chain will be as efficient as the base one.

Balancing lean and agility is increasingly becoming the focus of the most advanced supply chains, as it seems the only way to address the antagonistic requirements of customers, to have a large variety of products delivered very quickly. If you have any comments or ideas to share, don't hesitate.