How to shrink the “Uncertainty Circle” is the topic of a paper I read today. It has been written by Rachel Mason-Jones and Denis R. Towill and can be downloaded here free of charge.
Still too many cooperations do not analyze their supply networks using consistent and scientifically proven methods. Some already do. One case of a company (ABC) is described below.
In his 2009 paper Brian Tomlin analyzes strategies to mitigate disruption risks in a three echelon supply chain.
Setting
Focus in his research is a single company, with its suppliers and customers. The objective is to maximize expected utility, while demand and supply are uncertain. There are two products available which can be used as substitutes. The time horizon for the decision maker is one season where the products can be sold.
The article reviewed here takes a look at typical biases in supply chain demand planning and how to avoid it. This work could prove very valuable for many companies who rely on manually adjusted forecasts.
Usually the forecasting process uses two steps:
1) statistical forecast by the forecasting system
2) manual adjustment to include additional effects (eg. additional analysis of demand pattern not included in step 1)
