CSCMP's Supply Chain Quarterly
March 18, 2018

What's your "tipping point?"

Smart companies prepare for crisis by predetermining triggering events that prompt specific responses.

In these turbulent times, it's important to be ready to make quick changes in your supply chain operations in response to a sudden turn of events. But even those who are prepared for change may not always be sure when to act. If that sounds familiar, then perhaps you should consider implementing a "tipping point" strategy.

A tipping point strategy involves predetermining a triggering event that, if it occurs, will prompt a specific action. Here's an example. Suppose that the price of oil rises to $125 a barrel. At that point, a company would shift its international shipments from air to ocean to avoid the sharp increase in air cargo rates that inevitably follows a spike in oil prices.

The price of oil isn't the only measure that could be used as a tipping point, of course. Supply chain managers could also use stock levels (days of inventory on hand) or demand (sales orders). If demand for an item reached a certain threshold in a market, then a company might source that product from a different supplier or reroute shipments from another location to ensure sufficient supply is on hand to capture sales.

The point here is that smart companies don't allow themselves to get caught flat-footed by disruptive events, whether it's a port strike, a volcanic eruption, or an unexpected surge in sales of a particular product. Supply chain leaders plan ahead and predetermine both triggers and responses so they will be managing a crisis rather than merely reacting to one.

James A. Cooke is a supply chain software analyst. He was previously the editor of CSCMP's Supply Chain Quarterly and a staff writer for DC Velocity.

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