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Practical drift an invisible, potentially catastrophic threat to supply chain

June 9, 2016   by Angela Stelmakowich

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One of the biggest threats to a company’s supply chain cannot even been seen, but surely will be felt should it take hold, Nexbridge Inc.’s Randall Becker suggested Wednesday during the World Conference on Disaster Management in Toronto.

Practical drift, which he defines as an unnoticed drift, “is what happens when processes drift off specification,” Becker, managing director of Nexbridge, explained to attendees of the session, The Real Reason Your Supply Chain is Already in Trouble.

Pointing out that “our processes involve a lot of these little moving parts,” it may appear everything is fine, but that, in fact, may not be the case. “We’re talking about hidden effects on the business, on your business, from these moving parts that when they act together, they misbehave,” Becker said.

“Practical drift is invisible; it hides,” he cautioned. “When you start taking into account cumulative effect, it really is cumulative. You have a much larger operating envelop that you don’t know about,” he said.

It may be that each individual point or factor seems fine, but cumulatively they are not. “They’ve drifted off spec,” Becker said, which can sometimes produce “catastrophic kinds of fails that are completely unseen.”

When dealing with a supply chain, each element of the chain is a point. For example, “each company producing a part, producing a consumable, producing whatever you need in your supply chain, including you and everyone else down the path,” Becker told seminar attendees.

But what happens when all these points are put together? “Are they actually doing what they’re supposed to be doing cumulatively?” he asked. “That’s kind of a hidden silent killer.”

Citing as an example suppliers who do assembly along the line, “they’re putting multiple parts with multiple tolerances together and you’re sitting at the end of their chain hoping that this stuff works,” he explained.

Changes are being made along the supply chain all the time, meaning that the product received last week may not be the same as the one received this week. “Do you know that? Have you monitored for that? Are you taking that into account in your supply chain?” Becker said.

And if a company is in a just-in-time (JIT) environment, “it’s your reputation that gets hurt first if you don’t get a part that works properly, that’s off spec. So you have to monitor to this,” he emphasized.

“By not having resiliency, by not planning for resiliency, we’re leaving ourselves completely vulnerable on an ongoing basis,” he cautioned.

“Every kind of change that you are going to experience in just-in-time is going to impact you. Any change. And you can’t control the fact that there are changes,” Becker said.

“A supply chain that doesn’t have a lot of resiliency is going to fall apart,” he told attendees. And in a JIT supply chain, “any disruption, anywhere, is going to hit.”

A lot of times, this is caused by “not being aware of your situation, not knowing what’s going on, not monitoring your customers,” Becker suggested.

“Is there only one supplier for a particular part in your supply chain? If there is, worry, because they might now be around tomorrow,” he said.

“If there’s two, have a strategic relationship or start thinking about have you got a back-up plan?” he recommended. “You’re still kind of just-in-time, but you’re not the linear, just-in-time anymore.”

Single sourcing, simply, is “anti-resiliency. It’s great for profit while you can do it, but only while you can do it.”

Becker cautioned that issues along the chain – whether at the front, the back or in the middle – should be of concern. “The stuff that was bothering you at one end – your frameworks and your legal stuff and your import processes and export process and all that – in a global environment, it’s commonly impacting you at the other end also,” Becker explained.

Being global, he noted as an example, “any trade tariff, any trade barrier is the equivalent – at least at the Board of Directors’ level – it’s a disaster. It’s a disaster that has to be managed like any other physical disaster.”

That means keeping abreast of changes and influences is critically important, he suggested. The most important thing is to be situationally aware and know the “kind of change that’s going to hit you,” he said.

Being situationally aware involves monitoring customers, monitoring suppliers, watching for technology changes, seeing pricing changes is important, keeping pulse of regulation changes, and being partners with supply chains.

“You must know what’s going on. You cannot be constrained by the walls of your office, because your office is not limited to the walls. Your supply chain is your office,” Becker advised.

To help with detecting concerns, it is recommended that the following be done:

  • look for bottlenecks and vulnerabilities in your supply chain;
  • figure out your suppliers’ key performance indicators (KPIs);
  • figure out your customers’ KPIs; and
  • cultivate alternatives.

“If you look at your supply chains today,” Becker noted, “I would lay really good odds that your supply chain is significantly more complex today than it was last year or the year before. And every year that we go on, our supply chains are becoming more elaborate, more complicated, but still linear,” he said.

“And it’s the linear nature of just-in-time supply chains that makes them so incredibly vulnerable,” he cautioned.

“You have to assume that your supply chain tomorrow is not going to be what it is today. If you do not make that assumption, you will go out of business.”

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