Harvard Business Review on Managing Supply Chains

When a company is organized for direct, quick, and rich communications among those who manage its supply chain, it’s easier to set a steady rhythm. Conversely, a strict schedule for moving information and goods through the supply chain makes it easier for operators at different steps to communicate with one another. And when the company focuses its own capital assets on responsiveness, it becomes simpler to maintain this rhythm.

Once a company has accepted the uncertainty of demand, it can employ three coordinated strategies to manage that uncertainty. It can continue to strive to reduce uncertainty—for example, by finding sources of new data that can serve as leading indicators or by having different products share common components as much as possible so that the demand for components becomes more predictable. It can avoid uncertainty by cutting lead times and increasing the supply chain’s flexibility so that it can produce to order or at least manufacture the product at a time closer to when demand materializes and can be accurately forecast. Finally, once uncertainty has been reduced or avoided as much as possible, it can hedge against the remaining residual uncertainty with buffers of inventory or excess capacity.

To turn your supply chain into a powerful competitive weapon, you need to apply six key practices, advise Slone, Mentzer, and Dittmann.

top-performing supply chains possess three very different qualities. First, great supply chains are agile. They react speedily to sudden changes in demand or supply. Second, they adapt over time as market structures and strategies evolve. Third, they align the interests of all the firms in the supply network so that companies optimize the chain’s performance when they maximize their interests.

real options valuation. This technique lets you put a dollar figure on flexibility in the supply chain and helps you assess the value of having direct control.

the same-day availability of spare parts

Build inventory buffers by maintaining a stockpile of inexpensive but key components.

bad weather and other unforeseen