As I was browsing through news stories over the weekend, I came across a story that at first made me chuckle, but then I realized actually has some interesting parallels to draw on. I read, in the Irish Times, that the government is essentially having trouble procuring enough salt to treat all the icy roads and footpaths in Ireland. This has been caused by the unexpectedly cold and snowy winter they are experiencing in the region. The weather has created an unexpected demand for salt.
This sort of situation is not all that uncommon, when taken at a high-level. Basically, what we have is an unexpected circumstance necessitating an increase in supply for a given commodity. The two issues this raises are:
1) What to do in such a situation?
2) How to avoid getting into such a situation?
One of the best practices Ariba recommends is always having lots of options in the supply chain. Even if your supplier of salt is A-Okay and never fails to fill an order, it is a good idea to have a number of fallback suppliers that are vetted and could be ready to go should the primary supplier fall through. When the economy was being hit hardest, we saw that there were a lot of gaps in how organizations had adhered to this best practice. Many areas were single sourced and not backed by a quality vendor pool that would enable sustainability and security of the supply chain. And, when the primary supplier occasionally fell through, we began to see threatened- and sometimes, even broken- supply chains.
As we have developed the Ariba Discovery product, I've had the chance to speak with a number of the leading buying organizations using Ariba Discovery. One common thread between all those organizations is their approach to their vendor pool. They believe that it is always better to know about more vendors and that abundance of vendors = options, which, in turn = security. I tend to think these organizations are best in class, and if you got to see any of them speak at Ariba Live 2009, then you'll probably understand why. Feel free to contact me if you'd like a copy of any of the presentations leading sourcing organizations delivered on this topic- they are very good. These organizations were able to achieve their vendor pool growth goals by using Ariba Discovery to find, evaluate and contact new suppliers. One of the things I found most interesting, and will likely blog about in the future, was how one organization took increasing the size of the vendor pool so seriously that the organization actually made it a measurable performance objective for each commodity manager.