Understanding the Surge



One thing we ought to understand when thinking of surge periods across the supply chain is that, for the most part, these spikes are anticipated. Manufacturers, retailers and even logistics providers have a good idea, roughly six months to a year ahead of time, when these peaks will happen. Some of them revolve around key consumption periods—Christmas, summer, even Valentine’s Day. Some of them are caused by promotions, whether it be by the manufacturer or the retailer. Some of them are even caused by sales people trying to hit quotas as they reach the end of the month or quarter.


In any case, all stakeholders across the supply chain have some safeguards and plans in place for surge periods. Anticipated peaks are already factored into production, sales and marketing plans, and ideally have been communicated with partners and aligned with their plans. For other peaks—say, ones caused by trigger points in supply, like a rise in price of raw materials—these are addressed by a buffer of inventory or production capacity, usually of around 20 to 50% on top of forecast demand.


Logistics providers, on the other hand, address these peaks by being on a constant lookout for opportunities to expand capacity, whether it be by subcontracting with truckers and other transport providers, or by investing in capacity themselves—buying new trucks, building new warehouses, training new people. This, of course, takes a long time—finding the right people (and the right people to train these people) isn’t easy, and as we discussed in our last column, government rules can be a hindrance to expanding.


The result is what one of our members described as a “constant surge period” for logistics providers. The inability to fully cope with forecast demand—more so unforeseen spikes—mean lower service levels and lower customer satisfaction, as shelves come up empty or deliveries don’t arrive in time. It’s also frustrating for other stakeholders: manufacturers and retailers both suffer from impressions that products are not available, and may ultimately lose customers. It’s not for lack of trying, though—although some problems with capacity stem from, say, trucks falling below standards and being deemed unsuitable by manufacturers. Everyone wants business, but if they can’t do it well, why push it?


There are two approaches to addressing issues surrounding peak periods. One, as we’ve discussed in our last two columns, is expanding capacity. This goes across the supply chain, but primarily impacts logistics providers, who will need not just new facilities and equipment, but also qualified people who are able to perform (and exceed expectations)—and who are happy to stay.


For manufacturers and retailers, this could also mean a way to see, in real time, what resources are available to them, so they can tap that during unplanned peaks. Maybe something like an Uber for trucks? We are encouraged that such a portal is being looked into by the government as it addresses supply chain bottlenecks—but news of government servers going down for an extended period of time last week reminds us that they have capacity issues they need to address, too.


The other approach is further collaboration amongst players. This is already being done to an extent: manufacturers, retailers and logistics providers keeping each other on the same page so as to mitigate, if not entirely avoid, issues that may come up with surges in demand. However, the complex nature of the supply chain ecosystem—global, tangled—means there will always be hindrances: concerns over confidentiality, over secrets being passed on to the wrong people, of simple miscommunication between stakeholders. In a perfect world, collaborative forecasting would be standard. It may sound daunting, but supply chain is about managing relationships anyway—and the best way to deal with your customers is to be aligned with your partners and other stakeholders all throughout, and not just during the weeks leading up to Christmas eve.


Upcoming events: Today we are opening registration to the 2018 SCMAP Supply Chain Conference, which happens on October 2-3 at the EDSA Shangri-la in Mandaluyong. Our first keynote speaker is none other than Dennis Uy of Chelsea Logistics, one of the most important movers in Philippine supply chain today. We will continue to tackle supply chain’s most important issues, details of which we’ll reveal in the coming weeks.


Also, our Visayas chapter will mount the third Sharpening the Supply Chain Practitioners event on August 24, from 8am to 5pm, at the Maayo Hotel in Mandaue City. Speakers include Tata Albert from Vitasoy-URC, Amr Abbas Mahmoud Saleh of Mondelēz, Joyce Ramos of LF Logistics and Christine Pardinas of Rustan Supercenters. More information on both events are available at our website, scmap.org.


Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.