APICS CEO Abe Eshkenazi, CSCP, CPA, CAE -
February 14, 2014
As many people in the United States continue to deal with snow and ice in what feels like an unending winter, the sentiment of Valentine’s Day may not be enough to keep homes warm and farms running. An ongoing propane shortage is making lives—and business operations—difficult.
The New York Times featured a story about the shortage last week. While propane production is 15 percent higher now compared to last year, inventories are nearly 50 percent lower. In rural areas, propane is used to heat homes and provide portable electrical generation. “Southerners and Midwesterners who depend on the fuel are angry and confused,” write Alan Blinder and Clifford Krauss. In North and South Dakota, officials are providing shelters for the Standing Rock Sioux population, who rely on the fuel for survival. In other parts of the country, government representatives are calling for investigations into price gouging.
Now, propane prices have almost doubled in much of the country. More than 20 states have declared emergencies or removed transportation restrictions, such as limits on roadway hours for propane drivers. Minnesotans, who use propane in about 250,000 homes, can call an emergency hotline to ask for advice or assistance, but many are frustrated by the service and find it inadequate.
The breakdown of the system has complex roots. As propane production increased, demand remained steady, but prolonged frigid temperatures this winter led to a surge in demand for both homes and farms. Heavy rains last year also created masses of wet corn, which propane is used to dry. Lastly, US propane exports have risen steadily since early 2012. Further complicating matters is that, like many fuels, propane normally is not stored in large amounts at the local level, Blinder and Krauss write.
This means the problem, says Clifton Linton, specialist at the Oil Price Information Service, is not about production—it’s about logistics.
Make your preparations
For most of us, failing to deliver a product on time doesn’t mean lives are put in jeopardy. But, supply chain and operations managers must deal with demand surges all the time. Having the right strategy in place for unexpected demand requires the involvement of many functions, including planning, forecasting, capacity management, logistics, and risk management.
While you can’t control the weather, you can control your company’s response to a crisis. According to the APICS Supply Chain Risk and Reward Folio, four steps to recognize and respond to supply chain risks include
- detecting the indicators of the risk
- developing a response based on your evaluation of the causes
- deploying rapidly your risk responses
- determining the effectiveness of the response and adjusting the plan.
Last year, the APICS Foundation introduced the APICS Risk Management certificate as a way to demonstrate to employers that you have the ability to evaluate supply chain risks and balance risk and reward in the decision-making process. The APICS Foundation now is rolling out a similar certificate for sales and operations planning (S&OP). Earning the APICS S&OP certificate shows that you have a grasp of the principles and functions of the process.
Today’s supply chain managers need to have an understanding of the complexities in today’s business environment. For more information about the APICS Risk Management and S&OP certificates, and to find out how you can begin earning credits toward achieving them, visit the APICS website.