Long lead-times and high inventory levels constitute a major risk in the supply chain. The sudden death of a product, price erosion, ambitious forecasts and other factors makes an analysis of supply chain risks and liabilities crucial for any company. This is not a trivial effort, as there can be multiple suppliers with contractual liabilities as far upstream as the fifth or sixth tier. Many business decisions also impact directly upon the risks in the supply chain, and these risks should be clearly understood and carefully weighed when such decisions are made.
Key Questions
- Within the current supply chain structure, how much liabilities, and therefore risks, are there?
- What are the impacts of pre-production, maintaining safety stocks or other business decisions?
- What is the impact of forecast inaccuracies?
Risk & Liabilities and SimFlex
SimFlex can be used to accurately represent the supply chain structure and associated lead-times. Each tier in the supply chain can involve a different level of liabilities. When this is combined with a demand forecast, either perfect or inaccurate, the result is a transparent and quantified analysis of the liabilities in the supply chain, on a total, company, facility, supplier, product group or even SKU level.