5 Supply Chain Lessons From The Colonial Pipeline Outage

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As media reports chronicle the ebb and flow of demand and shortages of gasoline in the wake of the Colonial Pipeline outage, I’m reminded of five critical components of supply chain planning that needs to be taken into consideration:

1. Fool Me Once, Shame On You. Fool Me Twice, Shame On Me.

We live in an interconnected world geared around being nimble, flexible, and low cost. That means that there’s little room for error when there are dislocations in the supply chain. Take for example a hypothetical situation of losing power due to “the storm of the century”. Or take for example a hypothetical cyberattack on U.S. infrastructure. I wonder if they’ll ever happen.

READ MORE: Disconnected Connectedness: The New Supply Chain Post COVID-19

These events will continue and are not aberrations. If it’s not the weather, then it’s something else forcing disruptions. You have no excuses for lack of planning and thinking ahead!

2. Optionality, But At What Cost?

You can solve demand spikes and supply shortages with increased inventory. That’s fine if you can afford the carrying cost and have room for creating the buffer and maintaining it. Large warehouses aren’t cheap. Refined products require very specialized tanks for storage.

Therefore, focus on options in the supply chain. Even if you have a primary source for supply and logistics, set up contracts with other companies. Continue to re-evaluate options. Each mode of transportation has its costs/benefits for efficiency, speed, and cost to get products to market. Challenge conventional norms by planning ahead. Spending more time and money now to have future optionality will pay off in the future for the next unsettling event.

3. Does ‘Gut Feel’ Always Win Out Over New Technology?

Energy companies have an interconnected supply chain that spans regions. Gone are the days of purely selling in one locale. Extra value is achieved by getting the product to another market. Experience wins out on most days on how the supply chain “should” behave based on past behavior. However, don’t shut down new ideas because they run counter to past norms.

READ MORE: Putting A Face On The Supply Chain: Resiliency Or Achilles’ Heel?

Instead, leverage the experienced talent and knowledge of seasoned employees to examine and embrace technical tools devising new routes, supply points, exchanges, contracts, and so forth in the supply chain.

4. Create A Digital Twin Of Your Supply Chain & Model

You cannot model your supply chain purely on a whiteboard. You can barely keep up with it in Visio or an Excel model. Recognize that there are too many real-world factors that need to be incorporated for it to reside in Excel.

Instead, embrace optimization tools and packages currently in the market (e.g. ION’s WAM supply chain solution) to build out and model a digital twin of your supply chain. Leverage what has been done before to get 75%-80% complete. Then, customize as needed beyond the base to tweak the software to fit your company’s business.

5. Develop A Bias Towards Action

As Elon Musk once said, “Some people don’t like change, but you need to embrace change if the alternative is a disaster.” COVID-19, the global recession, and the Colonial Pipeline hack have all taught us that you cannot rest on your laurels and maintain the status quo.

READ MORE: Out Of The Silo: Why Intercompany Collaboration Enhances Supply Chain Efficiencies

Instead, you need to be proactive. Develop a culture that rewards and prides itself on creativity to focus on the supply chain. Reach out and examine new technologies by which you can model your supply chain. Begin examining the optionality available to your company so that your operational and supply chain risks are diversified.

Your company will make mistakes. Fail early and learn from those mistakes and missteps during these lulls between national media events. What we know for certain is that the new norm is instability.

 

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