KEVIN LEVINE

A supply chain audit starts by performing a freight analysis. This is done to determine where the business stands presently the logistic service group walks in. In a world economy, the cost of adding goods has decreased considerably and businesses now origin products from many portions of the world. With this freedom to source from many areas of the world comes an alternative set of issues to the business owner. Volatile currency exchange rates along with disruptions in the supply chain from earthquakes, that will fire, flooding and political lack of stability in Asia or Europe could possibly destroy a local company overnight. Most companies do not plan for these issues until it can be too late. Desperately working to see new suppliers for goods that you have already received orders for can begin a negative business control that increases expenses, reduces margins and creates poor customer relations.

Successful companies now know that they must reduce this risk to their business by developing contingency plans before an emergency occurs. To develop these plans they work with a process called Scenario Preparing. Scenario planning allows a business to investigate and create alternative plans to ensure their business is guaranteed against disruptions from external forces outside of their control.

In this article we will review your steps to effective scenario planning.

Step one in scenario planning is to define the objective.

In our business example we can look in detail at our theoretical companies furnish chain. Our business has 20% with the product line representing 80% with the bottom line profit. We find that 90% of the profitable products comes from Asia and Europe. Typically our lead instances from these suppliers are 4 weeks. We keep a small to medium sized inventory for emergencies in Canada. So we have identified that him and i rely heavily on the supply chain to maintain inventory low and to satisfy customer service levels.

Based on this information we decide that our objective is to review possible scenarios that negatively affect our supply company. In each scenario we will review that the business metrics of cash flow, inventory, cost of gross sales and lead times are affected. We decide to purchase team members involved along with the supply chain, including investing in, inventory, manufacturing (when there is any component done the following) and shipping.

Step is to identify key drivers that have an impact on the supply chain examples. In this case we would glance at the product suppliers and the logistic companies linked to delivering the goods to our location.

Step is to get hold of data. We contact the suppliers and logistic companies to require their scenario plans. Do they count on one plant to manufacturer the products? How many "down days" do they have each year during the last 5 years? What if a labor strike or a healthy disaster were to hit their plant, what is their propose to minimize product supply delays? What plans does the shipper have if a typhoon or a weather issue closes their principal hub?

Step 4 is to create the scenarios that use the data collected. Is you will find there's time of year risk to any portions of the supply chain as a result of weather? What happens if political tensions or natural disasters affect the country where the main plant for any manufacturer is located? These scenarios need to be tested to see their affect on earnings, the ability to meet orders, inventory levels as defined in step one. logistic company