Why CSCMP EDGE Conference is So Important

 Last week I spent most of my time at the Council of Supply Chain Management Professionals (CSCMP) Edge conference in Orlando Florida. Just a few hours into the first night and I remembered why coming to this conference is so important and has been such a great part of my supply chain career. I thought I would share some thoughts with you and hopefully the younger readers will realize your supply chain career is a life long journey. Getting to know the leaders of your generation will make you a leader. So, here goes:

1. Relationships: Yes, we all talk about this, however, this is truly very important and CSCMP has been there for my entire career. From the moment I started coming to this conference I met a number of people in different industries and different supply chain disciplines. From that point, we grew up together, learned together, celebrated together and helped each other. If I had not joined CSCMP early in my career and been intentional about coming to the conference year after year, I would not have known these people and my career would have been less fulfilling. 
   
   
2. Education: Continuous learning is must for any career and certainly supply chain is no exception. Because of my connection to CSCMP and attending conference sessions, I have been able to learn a lot of nuances about the discipline and I have used those learnings to hone my craft. I highly encourage anyone who attends to also attend the academic's conference on Saturday and Sunday. Quite frankly, that has been a highlight of my sessions and learning from the most brilliant academics makes me challenge what I think "I know". 
   
   
3. Time to Sharpen the Saw: I use my attendance at CSCMP EDGE to immerse myself in learning. That could be from the academic sessions, the practitioner sessions or the key-note and mega-sessions which challenge my thinking on many topics, not just supply chain. By listening and thinking deeply on the leadership topics, the supply chain topics, the business management topics and all the other items presented, I am able to use this time to truly execute what Stephen Covey called, "Sharpening the Saw". If you do not take time to do this periodically, just like a saw-blade, you will become dull and worn down. CSCMP EDGE is the perfect place to rededicate yourself to this discipline. 
   
   
4. Learn what is new: The vendor portion is truly world class. By walking the show and being disciplined about making sure you visit suppliers and interact with them, you learn what is new and interesting. My advice is to plan this out and plan your interactions. Learn and engage. You will be better for it. 

Overall, I just cannot imagine being in this discipline and not interacting at CSCMP Edge every year. Thank you to the CSCMP staff and all the volunteers who helped with the conference and worked tirelessly to make it such a great event. 

I leave you with a few pictures of my participation this year on two great panels. One on X-Shoring, Hosted by Alan Amling of University of Tennessee and the other on Meaningful Employment Environments hosted by Trail Paths founder, Robert Martichenko. 

J.B . Hunt v. Schneider... Head to Head Match Up

 I always find it interesting to compare these two companies and looking at the 10K's for 2022 and the 10Q's for the first half of 2023 and interesting picture is emerging:

Projection for 2023 at Beginning of Year from 10K:

Summary (Beginning of the Year): JB Hunt and Schneider are two of the largest trucking companies in the US. Both companies reported strong financial results in 2022, but JB Hunt's results were slightly better. JB Hunt also has a more optimistic outlook for 2023.

Here's a quick look at the numbers:

• JB Hunt: Revenue of $18.4 billion, up 27% year-over-year; Net income of $1.7 billion, up 43% year-over-year; Earnings per share of $3.33, up 41% year-over-year.
• Schneider: Revenue of $16.2 billion, up 23% year-over-year; Net income of $1.2 billion, up 22% year-over-year; Earnings per share of $2.45, up 21% year-over-year.

So, which company should be more successful going into 2023? I think JB Hunt is the better choice. It has a stronger track record of revenue growth, and its guidance for 2023 is more optimistic. Additionally, JB Hunt is investing heavily in new technologies, which could give it a competitive advantage in the long run.

Of course, there are some risks to consider. The trucking industry is facing some challenges, such as rising fuel prices and a driver shortage. These challenges could impact both JB Hunt and Schneider, but JB Hunt's stronger financial position gives it a slight edge.

After 1H2023 Has Concluded, How Is The Situation Developing?

Metric JB Hunt Schneider Revenue (first half of 2023) $9.2 billion $8.3 billion Net income (first half of 2023) $778 million $622 million Earnings per share (first half of 2023) $1.55 $1.24

As you can see, JB Hunt's first half of 2023 performance was slightly better than Schneider's. JB Hunt's revenue was up 12% year-over-year, while Schneider's revenue was up 8% year-over-year. JB Hunt's net income was also up 12% year-over-year, while Schneider's net income was up 9% year-over-year.

However, it is important to note that the trucking industry is facing some challenges in the first half of 2023, such as rising fuel prices and a driver shortage. These challenges could impact both JB Hunt and Schneider, but it is too early to say how they will affect the companies' full-year results.

Overall, JB Hunt's first half of 2023 performance is in line with my expectations. The company is still growing and profitable, and it is investing in new technologies to stay ahead of the competition. I believe that JB Hunt is a good investment for the long term.

Here are some additional thoughts on the first half of 2023 performance of JB Hunt and Schneider:

• JB Hunt's intermodal segment, which handles the movement of containers between trucks and trains, performed well in the first half of 2023. This is due to the continued growth of e-commerce, which is driving demand for intermodal transportation.
• Schneider's truckload segment, which handles the movement of freight over long distances, performed more weakly in the first half of 2023. This is due to the driver shortage, which is making it difficult for Schneider to find qualified drivers.
• Both JB Hunt and Schneider are investing in new technologies, such as self-driving trucks and artificial intelligence, to improve their operations. These investments could give the companies a competitive advantage in the long run.

I will continue to monitor the performance of JB Hunt and Schneider in the second half of 2023 and beyond. I believe that both companies are well-positioned for long-term growth.

I Used the Most Recent 10Ks to Create a SWOT analysis

 Using an AI tool, I had it look at the 10K's for the top 5 trucking companies and asked it to provide a SWOT analysis for the trucking industry.

NOTE: This is Generative AI:

Here are the top 5 trucking companies in the US, based on revenue in 2022:

1. UPS Inc. (NYSE: UPS)
2. FedEx Corp. (NYSE: FDX)
3. XPO Logistics (NYSE: XPO)
4. J.B. Hunt Transport Services Inc. (NASDAQ: JBHT)
5. Knight-Swift Transportation Holdings Inc. (NYSE: KNX)

I have reviewed the 2022 10Ks of these companies and here is a SWOT analysis for this industry:

Strengths:

• Strong financial performance: These companies have all reported strong financial performance in recent years, with high revenue and profit margins.
• Large and diversified fleets: These companies have large and diversified fleets, which allows them to offer a wide range of transportation services to their customers.
• Experienced management teams: These companies have experienced management teams with a deep understanding of the trucking industry.
• Strong brand reputations: These companies have strong brand reputations, which gives them an advantage in attracting customers.

Weaknesses:

• Rising fuel prices: Rising fuel prices are a major challenge for the trucking industry, as they can eat into profits.
• Driver shortage: The trucking industry is facing a driver shortage, which is making it difficult to find qualified drivers.
• Increased regulations: The trucking industry is facing increased regulations, which can add to costs and complexity.
• Competition from other modes of transportation: The trucking industry is facing competition from other modes of transportation, such as rail and air freight.

Opportunities:

• Growth in e-commerce: The growth of e-commerce is creating new opportunities for the trucking industry, as retailers need to move goods more quickly and efficiently.
• Expansion into new markets: These companies could expand into new markets, such as international markets.
• Development of new technologies: These companies could develop new technologies to improve their operations, such as self-driving trucks.

Threats:

• Economic downturn: An economic downturn could lead to a decline in demand for trucking services.
• Technological disruption: Technological disruption, such as the development of self-driving trucks, could pose a threat to the trucking industry.
• Changes in government regulations: Changes in government regulations could impact the trucking industry.

Overall, the trucking industry is facing some challenges, but there are also some opportunities for growth. The top 5 trucking companies are well-positioned to take advantage of these opportunities and continue to grow their businesses.

I hope this helps!

More on Scenario Planning - 5 Thoughts for Surviving the Supply Chain Downturn

 "You can be wrong half the time and still make a fortune"

I am reading a fabulous book about managing your emotions as it relates to investing. The book is titled, "The Psychology of Money" and, as you can imagine, my mind went to supply chain strategies and how this psychology can apply. My mind also went to a theme I have been writing about relative to scenario planning. 

The quote above is from the lead page in Chapter 6 titled, "Tails, You Win". and it truly embodies a lot of what scenario planning is about. Here are the key lessons:

1. Your Business Plan Cannot Depend on Perfection:  Whenever I see someone developing a plan the first question I ask them is, "What if assumption [fill in the blank] is not accurate? What happens to the plan? If they cannot answer that question or the answer is the plan falls apart, then there is no plan. There are numerous sayings on this but it all comes down to not developing a plan which relies on a hole in one. Holes in one rarely happen. "The more you need specific elements of a plan to be true, the more fragile [the plan] becomes".
   
   
2. The Plan "Bets the Farm": The quote from the book which applies here is: "Few gains are so great that they're worth wiping yourself (or your business) out over. When I hear people say they are going to be the "Amazon of..." or the "Tesla of...." I know the plan is doomed. Going to Vegas and putting it all on one number is not a strategy.
   
   
3. Planning is important, but the most important part of every plan is to plan on the plan not going according to plan. The follow on quote to this is, "you plan, God laughs". The author reinforces over and over again that "A plan is only useful if it can survive reality. And a future filled with unknowns is everyone's reality".  Bottom line is you must plan on the plan not going the way you want it to. 
   
   
4. Margin of safety / room for error: Allow for margins. It is one reason why leverage really can be a problem. Using leverage in financing removes a lot of the margin for safety and then you are back to violating rule 1 - you are hoping for perfection. 
   
   
5. Develop a barbelled personality - be optimistic about the future, but paranoid about what will prevent you from getting to the future. Andy Grove, founder of Intel, wrote a book titled, "Only the Paranoid Survive" and he was write. However, you must also be optimistic (not blindly) about the future. The future curve is almost always up and to the right for great plans as long as they meet these rules. 

These rules are just fantastic reminders of what makes a great business strategy and makes a business that can survive both the great times and the not so great times, like freight and supply chain entities are seeing now. 

Since it is July 3d and I am off tomorrow, I will leave you with a fantastic patriotic song. As a veteran, I am "Proud to be an American". 

Supply Chain Transformations Involve Many Elements - Thinking is The Most Important

It appears every supply chain I know of is in the middle of a big transformation. In many cases people misread the COVID Pandemic surge as a "new normal" and many invested heavily only to be shown that the idea of mean reversion is serious business. This is affecting even big and very sophisticated supply chains. Today we learned The Home Depot is even relooking at the supply chain efforts started during the COVID period (H/T: Supply Chain Dive). 

With great fanfare, just a few short years ago, Home Depot talked about the investment of $1.2 billion to create the "One Supply Chain". Today we learned they are now embarking on a $500M cost reduction in their supply chain as sales "return to normal".  This is happening all over as we discussed previously (Amazon adjusts) and is not unique to Home Depot. So, what are these transformations is missing? How do we whipsaw so quickly? Again, this is pervasive across many companies so I think it is worth thinking about. I have a few ideas. 

1. Strategy Duration: Many companies confuse tactics with strategy. Many companies also confuse short term "flash in the pan" with true change. I have always discussed the idea of mean reversion and have also used the statement "if something is too good to continue, it likely will not". Did anyone think the growth rates of 2020/2021 could continue indefinitely? So, strategically, should anyone have set up their long term capital investment and strategies around a growth rate that mathematically just could not continue? Lesson One: Strategy has to survive at least 5 years otherwise it is a tactic. 
   
   
2. Market First: Supply chain leaders and supply chains can sometimes get caught up in the science of running a supply chain but the leaders forget that all strategy has to start with the market then work its way back into the operations. I discussed this in my blog post titled: Go To Market Strategy Before Supply Chain Strategy
   
   
3. Scenario Planning: Many leaders forget this incredible necessary and powerful competency. As I wrote in my blog post: Scenario Planning - Face it, You are WRONG, predicting the future is a very difficult and dangerous business. In fact, I would say it is futile. However, what you can do is predict multiple futures and assign probabilities to each "future". You then can plan for it and also identify the key factors that you will monitor to determine which "future" is going to happen. The goal is to maintain optionality as long as you can. Don't commit until you absolutely have to. 
   
   
4. Change Management: Likely the most important part of any supply chain transformation is the idea of change management. You have to communicate, communicate and communicate along with doing the hard work of bringing people along with the transformation. 

So, have we learned any lessons here? Maybe. Although I fear the rush to supply chain automation could be another situation where supply chain industry think and FOMO is taking over. My prediction: in 5-7 years people will realize all this automation has made operations far too rigid and not agile enough to change. Much of it will get ripped out and as Elon Musk said in a tweet from 2018:

“Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated,” 

Strategy is hard work and it takes a lot of thinking. Humans are inclined to want activity and generally they do not believe thinking is an activity. But, it is the most important activity you can do in a transformation.  

The Who makes a return appearance in "Won't Get Fooled Again" (or, maybe we will):

Reality is Settling in for Supply Chain Companies

One observation for supply chain companies is becoming very clear: The anomaly in the business cycle is the period of 2020 through 2022 and that will not be a "new normal". The new normal is really just the old normal: You have to provide value, cost and efficiency rule the day, service is great but not at any cost (See my discussion on Amazon below) and money is not free so disciplined capital allocation is back in vogue. Of course, we should not be surprised at any of this. Did we really think the basic "X's" and "O's" of business were totally being changed? Some thought so in a big way, some were skeptical but found it interesting, and some actually predicted we would be back to the basics. Count me in the middle to the latter of that and I admit there were times where I was even in the FOMO mode of thinking. No more.

So, what is the data that points to the fact that we are back to basics:

1. Disciplined Capital Allocation: We read in the Wall Street Journal Logistics Report how Venture Capital Money is getting tight for logistics and supply chain start-ups. I think 2020 - 2022 will be seen as the "get it all while you can" time frame and those who raised as much capital as possible during that time will be winners - especially if they sold the company before the end of 2022. Disciplined capital allocation means less money (a lot less money) for companies who are not earning a profit or are a "me-too" company. Also, supply chain practitioners, who are under pressure to lower costs, are no longer going to get caught up in the FOMO sales game (software being bought for fear of missing out and the JDS - Just do something mentality). Bottom line, in this environment where money is actually valuable again, raising money on an idea will no longer be appropriate. 
   
   
2. Service is King BUT NOT at Any Cost: Amazon touted their idea of "we provide the service people want and we will figure out the cost" during the hyper growth phase of the pandemic. This meant if their inventory systems did not place the inventory at the right spot, and you wanted it same or next day, Amazon would incur the cost and get it to you. There was no debate. That was their issue and their job was to provide the service then go back and find out why it happened and how to ensure it does not happen again. They are calling this their new "Regional Distribution Model".
   
   Under the new regime they have decided if the product is not available "in the market" then the customer will have the burden. So, if you paid for "Prime" but the product is not in the market, there is no same or next day delivery. You wait. They are saying (it is fantastic marketing spin) that this provides better service however anyone who uses Amazon Prime a lot realizes the service has degraded dramatically due to this change of philosophy. I remember during the pandemic getting packages that clearly were flown to me from a different market. They did this for the reason I cited above. Now, the customer waits. Supply Chain Dive outlines this:
   
   "Under its previous national distribution model, Amazon would have to ship an ordered product from other parts of the country if a local fulfillment center didn’t have it in stock. This increased the company’s cost to fulfill the order while lengthening delivery times." The last statement is magic in marketing. 
   
   
3. Efficiency is King: Remember during the pandemic when all the major distribution players were screaming for labor? "Where has everyone gone?". Well, they came back but were not welcomed for long. As we learned recently, Shopify's logistics arm was sold to Flexport (run by Dave Clark who was the leader at Amazon when the previous, customer-centric, service model was developed). Shopify must have realized that running a logistics company is far more complicated and this transaction could be the revenge of expertise. Having a veteran like Dave Clark run a logistics operation makes more sense than doing it as an offshoot of a bunch of tech marketing people. Of course, the obligatory mention of "AI will make us more efficient" is woven throughout the Shopify announcement. 
   
   
4. The Stock Market is Rational - in The Long Run: A pandemic darling was Freightos (CRGO) because it was a source a lot of people used for information and freight services when containers were $20K each. As the saying goes, "If something cannot go on forever, it won't" and container prices have now normalized and the need for all of this information and service has disappeared. The company went public in a SPAC transaction (SPAC transactions are another thing we will look back at 30 years from now and wonder how we all went so mad at the same time) at $10 (as they all are) and now is priced at $2.08. This is after a big spike leading up to their earnings announcement next week. Although, earnings are somewhat of a misnomer as in December 2022 their earnings announcement showed they lost $7.24M dollars. 
   
   The good news for them is they went public. I think there are many venture capital owned supply chain firms which have not revalued themselves yet but when they do they will find they are valued a lot less than the previous round of financing AND they have no path to going public. Some doors may have to shut. 

In summary, we are back to where business belongs: Disciplined execution, real earnings matter, and capital allocation matters.

Round up Of Today’s Logistics News

Here is a roundup of some of the latest logistics news from around the world:

FedEx to transfer LA airport maintenance to Indianapolis

FedEx will exit a maintenance facility at LAX and send the work to its Indianapolis hub to increase efficiency. The move is part of a larger effort by FedEx to reduce costs and improve customer service.

Teamsters reject Yellow's proposed changes again

The Teamsters union said Thursday it has rejected less-than-truckload carrier Yellow Corp.'s plan to restructure operations at more than 200 terminals. The union said the changes would have resulted in job losses and a decline in service.

Countries Compete to Lure Manufacturers From China

Countries around the world are competing to lure manufacturers away from China, as the country's labor costs rise and its supply chains are disrupted by the COVID-19 pandemic. Countries such as Vietnam, Mexico, and India are offering tax breaks and other incentives to attract manufacturers.

Biden's Push to Counter China Steers EV Investments to Canada

President Biden's push to counter China is steering electric vehicle investments to Canada. The country has a number of advantages over the United States a and includes a skilled workforce and a stable political environment.

European Ports Brace for Cybersecurity Regulation

European ports are bracing for new cybersecurity regulations that are expected to be implemented in the coming months. The regulations will require ports to take steps to protect their systems from cyberattacks.

Stanley Black & Decker to Close Texas, South Carolina Plants

Stanley Black & Decker is closing two plants in Texas and South Carolina, as the company looks to reduce costs. The closures will affect about 200 employees.

Europe Moves to Revive Mining to Cut Reliance on China

Europe is moving to revive its mining industry in order to reduce its reliance on China for critical minerals. The European Commission has proposed a number of measures to support mining, including financial assistance and tax breaks.

South Korea Plans Mega Chip-Making Base to Stay Ahead

South Korea is planning to build a mega chip-making base in order to stay ahead of its rivals in the global semiconductor industry. The base will be located in the city of Pyeongtaek and will cost $20 billion to build.

Japan and South Korea Pledge Cooperation at Summit

Japan and South Korea have pledged to cooperate on a number of issues, including the development of new technologies and the promotion of economic growth. The two countries agreed to work together to develop artificial intelligence and to promote the use of hydrogen fuel cells.

Apple Supplier Foxconn Plans to Rely Less on China for Revenue

Apple supplier Foxconn is planning to rely less on China for revenue in the coming years. The company is looking to expand its operations in other countries, such as India and Vietnam.

And that’s all folks!! 

What is all the Fuss About With chatGPT? My Conversation WITH it…

Yes, I am saying my chat WITH it as I had a very interesting chat about the trucking business. I have a lot to think about relative to chatGPT and one thing is for sure. This is real and I can already think of many use cases for this tool. So, if you are not using it, you may want to think about it. A couple of observations from my conversation below:

1. Think of this as another version of a search tool but rather than giving me a list of websites to go to, this actually answers questions for me in conversational English. 
2. Notice my somewhat random follow on questions. I asked about trucking, then a follow up question on drivers, then e-commerce and then the impact on climate. The responses were perfect and very conversational. 
3. It is not just a screen scrape of another website as it brought disparate information together. 

NOTE: This post is about the viability of this new technology and I am sure people will take exception with some of its answers. That is not the point. The point is that the world is changing and you need to understand it. 

Here is my recent conversation with my new friend:

Me: Is trucking a viable business?

ChatGPT: Trucking can be a viable business, as it is an essential industry for the transportation of goods and materials. However, like any business, it can have its own set of challenges and obstacles to overcome, such as competition, regulation, and fluctuating demand. Additionally, the industry is currently facing a shortage of drivers, which can make it more difficult for trucking businesses to operate efficiently. It is important for those interested in starting a trucking business to conduct thorough research and have a well-crafted business plan in place to increase their chances of success.

Me: Why are they short drivers (I did not use a question mark so apparently punctuation is dead).

ChatGPT: The trucking industry is currently facing a shortage of drivers for a few reasons. One reason is that the job can be physically and mentally demanding, which can deter some people from pursuing it as a career. Additionally, the lifestyle of a truck driver, which often involves long periods of time away from home, can be unappealing to some.

Another reason for the driver shortage is the aging demographic of current drivers. Many experienced drivers are nearing retirement age, and not enough new drivers are entering the industry to replace them.

In addition, the industry has been facing a significant increase in demand due to the e-commerce boom, which has led to an increase in shipping and logistics, putting further strain on the limited pool of drivers.

Finally, the pandemic has also played a role in driver shortage, as many drivers were forced to stay home due to quarantine restrictions, and trucking companies were forced to limit the number of drivers on the road.

All these factors have contributed to the current driver shortage in the trucking industry.

Me: How big is the e-commerce boom (again, no punctuation):

ChatGPT: The e-commerce boom has been significant in recent years. According to recent data, global e-commerce sales are projected to surpass $4 trillion by 2020 and continue to grow rapidly in the coming years. This growth is being driven by factors such as increasing internet penetration, the proliferation of smartphones, and the convenience of online shopping.

In the US specifically, e-commerce sales as a percentage of total retail sales have been steadily increasing, reaching 16.1% in 2021. Online sales growth has accelerated during the pandemic, as many consumers were forced to shop online due to store closures and social distancing measures.

This e-commerce boom has also led to a significant increase in demand for shipping and logistics services, as more goods are being purchased online and need to be delivered to customers. This has put pressure on the trucking industry, which is a key component of the supply chain for e-commerce businesses.

Overall, the e-commerce boom is having a big impact on the economy and the way we shop, and it is expected to continue to drive growth in the coming years.

Me: What are the global warming issues related to e-commerce (The question mark is dead):

ChatGPT: E-commerce has several global warming-related issues associated with it.

1. Increased transportation emissions: The increase in e-commerce has led to an increase in the number of delivery trucks on the road, which contributes to air pollution and greenhouse gas emissions.

2. Energy consumption: Online retailers and delivery companies consume a lot of energy to power their warehouses, data centers, and transportation. This energy consumption can lead to higher carbon emissions.

3. Packaging waste: E-commerce often generates a lot of packaging waste, especially from the use of single-use packaging materials such as plastic bags, bubble wraps and cartons. These materials are not easily recyclable and end up in landfills and oceans, releasing methane, a potent greenhouse gas.

4. Returned goods: A large percentage of e-commerce purchases are returned, which can lead to additional transportation emissions and packaging waste.

5. Air freight: Some e-commerce companies rely on air freight to meet fast delivery expectations, which generates high carbon emissions and contributes to climate change.

To address these issues, e-commerce companies are exploring ways to reduce their environmental impact, such as investing in electric delivery vehicles, implementing more sustainable packaging materials, and increasing the efficiency of their warehouses and data centers.

This is where I ended the conversation.

More thoughts later on the use case for this but let this sink in a bit. The biggest use case I can think of right now is the threat to the google search engine. Rather than me asking for and getting a list of sites that I may have been able to get this information from, the system returned to me, in natural language, the answer to my question.

More to come…

Scenario Planning - Face it You are WRONG!

 I want to discuss some thoughts I have on scenario planning and why I think this skill is the future of supply chain management and planning. But first, let’s cover one thing and that is something you have to come to grips with: YOU ARE WRONG. 

As great supply chain managers, we all like to show how great we are with math and how great we are with developing algorithms to come up with “the number”. “The number” could be an ESOP number showing inventory requirements after detailed and exhaustive analysis of demand requirements or it could be something like what transportation or labor capacity I need to satisfy expected demand in the up coming months. Coming up with these numbers requires a lot of thought, a lot of data collection and the inevitable crunching of numbers. We then like to show everyone that these numbers are “the answer”.  As you can tell from what I titled this entry, I do not believe they are the answer. 

Rather, the supply chain manager should think of the number as the first step in a multi-step process to develop and document different scenarios which could occur. Think of this first number, not as the answer, but rather as the “base case”. It is a hypothesis. If all your assumptions come true then this number will likely be “the number”. Of course, in life, and in supply chain, all the assumptions almost never come true or develop as you planned them. I submit that almost every major event in the last 20 years in supply chain (2008 recession, 2020 COVID, etc.) were not in anyone’s base case assumption. 

Now that you are thinking of this number as just one possible outcome, what do you do next? Well, you build scenarios and you calculate what “the number” will be under all the different scenarios. You assign probabilities to those scenarios and, in some cases, you build out contingency plans to deal with specific scenarios, in advance, in case those scenarios come to fruition. 

There are many documented ways to think about this and for those who are academically inclined, I point you to a great research paper titled, “Next Generation Supply Chains” where they discuss the Gausmeier-approach to scenario planning and the Applied Approach to scenario planning. It is a great read to get the more academic base on scenario planning especially in supply chains. However I would suggest, after reading this article, you discover what will work in your company. How can you simplify it and bring it to the practical level.

I believe if you do this work, in advance, you will be much quicker in executing well thought out plans for each scenario that could develop. You will have thought about it in advance when you were not under undue pressure, you will have documented the assumptions and potential scenarios, you will have assigned responsibilities and tasks. All when you could think much more clearly. 

After all this is done, just like a great NFL quarterback, you can call the play and audible out of it with confidence and conviction that you have planned for the change of events and you have practiced it. 

Yes, getting “the number” is important. But, what is more important is that you admit that the number is wrong, and you plan for it.