The other night I was looking at CNN. As many of you probably know, in these financially troubled days, they visualize the evolution of the Dow Jones Industrial Average. During my one hour watch, I saw the DJIA at +198 and at -456, and about every other position in the middle. This is around a 7.5% swing in one hour. Similarly, this summer the barrel of oil was at 147 US$, today it's in the area of 65. How are we able to manage our supply chains in such volatile times? That's really the question for Supply Chain executives.

The Supply Chain Council has integrated the concept of flexibility in its SCOR© model. They use two concepts, the concept of adaptability, covering the amount of change that can be implemented, and of flexibility, the time it requires to get this change going. To measure this, they calculate the time it takes to respond to a 20% increase or decrease in customer demand. The 20% is arbitrary, but allows comparisons between companies and supply chains.

Building such flexibility across the eco-system requires an in-depth understanding of the dynamics of the value chain. Such understanding can only be gained through the collection of key information, not only within the company, but also across the whole chain. Flexibility cannot be developed cost effectively in isolation. Obviously one could increase the responsiveness of the supply chain by establishing large inventory buffers; however in the current circumstances this is not really applicable due to the short shelf life of many products and the cost/lack of capital to finance those buffers.

Building more collaborative relationships with partners and including them in the effort of building the flexibility in the Supply Chain is probably a better way of approaching things. It is a difficult one, however, as most of our companies have traditionally developed a rather adversarial approach with their suppliers. The procurement department being measured on savings only, has pushed the suppliers to reduce costs and only that. Building this collaborative relationship however requires an approach where both partners find benefits, a win-win approach as it is often called. Actually increasing flexibility and responsiveness in the supply chain is beneficial to all parties. Often companies forget that when a problem occurs, the most important is to respond faster than its competition. Issues, particularly when they are industry wide, bring with them opportunities, and it is not the first time companies have taken advantage of that. For example, FedEx handling of the Katrina hurricane situation and the speed of its response has helped them grow their business in North America. As described in an Information Week article, real-time visibility of its operations and careful planning has allowed FedEx to react quickly. The fundamental question is whether your company is ready to move next time?

With the current variability in the marketplace, are there opportunities to grow the business by improving the responsiveness of the organization to the variability? Can we take advantage of the large swings in the market? Do we have the tools to understand its impact not only on our business, but on the business of our whole supply chain?