Afbeelding van FelixMittermeier via Pixabay

What does SiOP have to do with the Corona-virus outbreak?

In crisis situations it is worthwhile to have risk mitigation in place

Since the middle of January China and an increasingly growing number of countries in the world is impacted by the Corona-virus. The collateral damage of the virus can be seen in global supply chains everywhere, which temporarily dry up while negatively impacting companies’ revenues and showing drastic downturns in the stock markets.

For some other companies however (medical equipment supply, sanitisers, and the like), you see an upswing in demand and with growing revenues, provided they had properly de-risked their supply chains. All-in-all the Corona-virus is proving to be a major disruptor of both the global and local economies.

A well organised and run SiOP-process will show its full benefits in disruptive situations like the current in a number of ways by looking forward, anticipate what is coming your way and acting upon that. Just to name a few:

–       Communication – informing about the supply situation of the company

–       Risk Management – triggering or upscaling alternative supplies and “plan B”-operations

–       Customer satisfaction – continue to satisfy the customers that are most important to your business

 Let me explain each of these briefly:

Communication

When you have a good functioning SiOP-process you will have a structured way to share critical information back and forth within a supply chain, from supplier to customer.

This means that supply issues or increased demands will be detected and communicated early and can be anticipated or acted upon. Actions can consist of either passively communication throughout your supply chain, or actively increasing/decreasing supply capacity and managing the supply chain risk based on the provided information.

Risk Management

When you have been running a SiOP-process for some time you will have surely worked on de-risking the supply chain. From a clear understanding of what are the critical materials, production capacities and service providers are, you will have worked out a plan “B”.

In this plan “B” you have identified alternative suppliers, required inventories, production capacities and/or service providers for these critical elements in your supply chain.

In more advanced situations you actually already work with these alternative suppliers, have built the necessary inventory, use the alternative production capacities and engage the service providers, so that you are on top of things when a crisis happens.

Customer satisfaction

There are many ways to bring (additional) value to customers (see also https://hbr.org/2016/09/the-elements-of-value). Being able to supply your customers and knowing when you will supply definitely are basic needs that are pre-requisites to keeping customers in the first place.

When you segment your customers properly you will be able to identify who are your most valuable customers that you want to treat preferentially.

Setting engagement rules as per the segmentation will help you to almost automatically satisfy preferential customers over less-preferential customers, leading to long term relationships with these most valuable customers.

Conclusion

SiOP is a process that will help you to identify disruptive situations in your Supply Chain at an early stage. With SiOP you can act appropriately to mitigate future risks, or materialise future opportunities as much as possible.

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