Summary:Responding to the challenges of risk and uncertainty in the modern economy, the panelists described the necessary evolution toward a combination of growth in size and accuracy of information available to companies. In recent years, the development of appropriate analytical systems and capable personnel to process incoming information has aided sound decision-making. The panelists repeatedly stressed the importance of maintaining and improving the skills of managers at all levels while remaining wary of rigid systems and sacrificing flexibility.
Ash Vasudevan astutely noted that without the presence of relevant and appropriate processes for digesting the vast amount of information available, all managers are doing is "making old economy mistakes at new economy speeds." Tom Wright agreed with this, noting the exceptional performance of his managers at Cathay Pacific Airways during the crisis of 9/11. No amount of contingency planning could have prepared his staff for those events; yet, they were able to minimize the losses from the unforeseen events through efficient internal action.
The panel contrasted the personnel characteristics they emphasized with formulaic decisions and responses. Complex mathematical models developed in recent years have produced complicated results that unfortunately do not correlate reliably to actual practices, they contend. The complexity of these models is their weakness according to Martha Amram. What is needed are simpler, more available models that, though they leave out many variables, produce less clouded, inconclusive results. Here the importance and relevance of capable personnel and appropriate decision-making processes become clear.
The panelists also agreed that all of this emphasis on personnel was not to downplay the importance of accurate and timely information. Ash Vasudevan noted the development of supply tracking at every stage in association with technological advancements such as R.F.I.D. Supply chain visibility and transparency is then essential to form the basis for sound decisions. However, Vasudevan reiterated the point that information is worthless without the proper analytical processes and capable people to take the proper course of action based on available information.
Despite the improved information available, uncertainty still pervades supply decisions coupled with the imperfect knowledge of demand factors affecting the economy. External factors led the panel among the influences driving increased focus on protecting value. Increasing globalization was among those concerns expressed as a source of uncertainty in light of 9/11 and its aftermath. Manufacturing outsourcing and increasing intensity of competition, both as a result of globalization, also concerned the panel as sources of uncertainty. Internally, many of the risks of uncertainty are solved through capable personnel, just as external risks.
Increased velocity of information availability and decisions have caused external events to be more near term than they have been in the past. A result, says Martha Amram, paralysis is often a response to uncertainty, which is just as detrimental as the effects of a causal shock. Companies too often respond like a "deer caught in headlights," said Navi Radjou. Investment has been stymied in Japan because of such paralysis; no amount of reassurance has been able to alter expectations of uncertainty and poor returns. To counter this, the panelists encouraged flexible proactive planning as opposed to reactive measures to take into account future unexpected events.
The panel focused directly on the present and the extremely uncertain state of the economy. In final comments, they were asked to specifically name companies that have dealt adroitly with risk and uncertainty. Chris Gopal began by describing the system Dell has used to become an industry leader in recent years, commenting that the company has effective multiple scenario planning, and responds quickly to market fluctuations. Walmart also arose as an effective supply chain manager, flexible and efficient enough to absorb shocks, though using markedly different techniques than Dell.
The human focus of the panel in implementing risk-mitigating techniques complements the already extensive focus on real-time and accurate information used to address the uncertainty of the economy. This proposition addresses both the uncontrollable external events that may effect production and operations and the internal uncertainty associated with personnel and supply chain.
