Uncertainty

I once spent a year in Philadelphia, I think it was on a Sunday.
W. C. Fields


This past week I was in Philadelphia for the Council of Supply Chain Management Professional’s (CSCMP) Annual Global Conference. With all due respect to W.C. Fields, I enjoyed Philadelphia. I’d been there several times, but never really had the opportunity to see the city. It’s a great place. While it’s not New York City or Chicago, or even Boston for that matter, I’d still rate it as one of America’s best big cities to visit.

The CSCMP conference was worthwhile as well. Well attended, good networking opportunities and useful information. Mostly, the information just confirmed what we already knew. The economy is slowing down, but not as bad as the headlines would have us believe. In fact, there was general agreement that companies are struggling to find enough qualified people (not just truck drivers and warehouse workers, but managers and executives with supply chain management/logistics experience.)

However, the underlying and consistent theme of the conference was how to manage in the midst of so much uncertainty. Most firms have the tools and expertise to effectively manage their supply chains IF enough key variables have reasonable levels of predictability. Today we just don’t know enough to effectively plan for anything other than uncertainty. And that’s really tough.

As Donald Rumsfeld once said: “There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.”
John Stewart and other pundits had a lot of fun with Rumsfeld’s “unknown unknowns”….but the truth is that Rumseld was right. (I just wish he’d paid more attention to his own words of wisdom…but that’s another subject.)

We find ourselves in a world of uncertainty including “known unknowns” and “unknown unknowns”. And to make matters worse, in some instances we are living with “unknowables” whether we know it or not. And some of what we know isn’t good enough for planning purposes. For example, it’s likely that over the next five years oil prices will be between $75 and $150 per barrel. For supply chain planning purposes, that range is too broad. I can also predict that governments, industries and individuals will take steps to reduce debt, but no one can accurately quantify what impact that will have on the global economy. And there are some really big “unknowables” out there. What if an earthquake and tsunami were to hit the western coastline of North America? What if the Mexican drug cartels gain control of their government (if they haven’t already)? What if the U.S. Congress becomes even more dysfunctional?

The supply chain models we’ve developed over the past 25 years have played a major role in creating a global economy. The world would be much poorer and much worse off without these efficient, global supply chain capabilities. Yet it would seem that the more we know about moving stuff around our planet, the more we have to be worried about. As a result, it is quite likely that our planning models will become even more complex. (Some scary smart people are using Game Theory based models these days in ways that will make your head hurt.)

But when it’s all said and done, humans will have to assess the risks and make choices. My greatest concern about the future is analysis-paralysis and fear of failure. There are always risks. Look at history. Many of the world’s greatest accomplishments were faced with overwhelming odds and incredible risks. In business, one cannot afford to ignore risks, but totally avoiding risks is even more expensive. I think that would qualify as “a known”.