Conor Doherty, LokadTV host, and Joannes Vermorel, founder of Lokad, discuss the inherent risks in supply chain management. Vermorel emphasizes that the primary risk is the uncertainty of the future, which is irreducible and beyond control. He notes that every decision involves a trade-off between risk and reward, and that zero risk is unattainable. Vermorel also highlights the opportunities that can arise from these risks, such as capitalizing on market shortages. He advocates an agile and opportunistic mindset, and the use of probabilistic forecasting to mitigate risk. Vermorel and Doherty conclude by agreeing that even small companies can benefit from risk management, leading to increased margins and cash flow.
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Timestamps:
00:00:00: Introduction and definition of terms
00:02:40: Uncertainty and cost of safeguarding in supply chain
00:03:54: Risk management and minimizing waste
:00:05:30: Irreducible risk and opportunities in supply chain
00:07:37: Supply chain vs manufacturing perfection
00:09:35: Risks and opportunities in supply chain and competitors
00:14:09: Problems with static approach in supply chain
00:15:56: Predictable mistakes as business practice
00:18:46: Engineering agility in supply chain
00:21:20: Dollar value of risk and opportunities
00:23:36: Financial optimization of supply chain risks
00:26:37: Lokad's approach to probabilistic forecasting
00:29:53: Risk of massive disruption and regional disasters
00:31:59: Factoring risks into daily supply chain decisions
00:34:08: Risk of losing big clients and correlation of risks
00:37:03: Distortion in map projections and mathematical models
00:42:31: Building forecasts and time series risk
00:45:20: Stochastic optimization and probabilistic approach
00:48:36: Decomposing economic drivers for supply chain decisions
00:51:44: Companies often surprised by past events
00:57:00: Damaging forecasts and cross-entropy in forecasting
01:00:00: Importance of actionable risk assessments
01:06:49: Financial risks of inventory distribution
01:13:54: Cost of promotions and IT dependencies as a risk
01:17:22: Difficulty of modeling customer psychology
01:24:26: Evaluating time series forecasts
01:27:33: Risks in mainstream supply chain software
01:29:30: Closing thoughts and call to action
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