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/wp-content/uploads/2013/10/sriracha_311560.jpgOk, so there are more pressing matters in the world than the potential Sriracha shortage The Huffington Post is reporting on. But this spicy situation is a surefire way to give any seasoned CEO (and its cult followers) indigestion. What do you do when you are forced to shut down operations?

For the uninitiated, Sriracha (pictured) is a popular hot sauce manufactured by the Huy Fong Foods plant in California. Complaints from nearby residents about the strong odors emanating from the plant may force the company to shutter operations for a bit to figure out a solution, which could lead to a shortage, company founder and CEO David Tran told the L.A. Times.

Supply chain disruption? Potential product makeover? Cranky customers? Sounds like a job for SAP.

I had a chance to catch up with SAP’s Supply Chain guru, Richard Howells, to learn what he would recommend in this type of fire, er, dire situation.

1. Don’t get hot under the production collar. Alternate sources or production facilities would mitigate supply chain risk, according to Richard. “Being 100% reliant on one facility or supplier to produce a product makes you vulnerable to unexpected delays, issues or downtime,” he said. “It’s also an opportunity to perform preventative maintenance on the equipment to ensure no downtime when you return to production.”

2. Warm up to software solutions. Software solutions can help identify alternate sources or the reliability of supply (e.g. Supply Chain InfoCenter), according to Richard. “This also appears to be an area where a PLM solution can help in the research and development of alternate recipes for producing a less pungent version of the product,” he said.


3. Keep customers cool. Are there other strategies, besides raising prices, to stay in business? According to Richard, “You are in a situation where you have to prioritize customers and ensure the supply you do have gets to the customers you need to service best. Customer segmentation is key when demand exceeds supply.”

What supply chain best practices would you deploy in a time of crisis?

Kick things up a notch with me on Twitter: @TClark01

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  1. Jacqueline Prause

    SAP HANA to the rescue! Semantic Visions is a member of the SAP Startup Focus program that is using SAP HANA to detect and mitigate supply chain threats – which could be very useful to the retail chains and restaurants that depend on a steady supply of Sriracha and need to source quickly from alternate suppliers at the best price possible. Of course, there are many other great uses for this technology – but HANA will get you your Sriracha fastest!

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    1. Stephen Johannes

      Honestly this is downright ridiculous turning every non-automated problem into some chance to sell HANA!  The first option suggested above is probably the best way to solve the issue.

      Only a food service distributor or large chain could even afford HANA in the first place.  The smaller mom and pop operations probably don’t even bring in enough revenue to afford your over the top solution.

      Take care,

      Stephen

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        1. Stephen Johannes

          I’m still scratching my head how a small business(think annual revenue under 2 Million) could even afford the solution and most of them are lucky enough to have a point of sale device.  I know of a case of a small manufacturer under $100 Million annual revenue where the entire IT budget was $100K per year or less.  I’m sure companies building “cheap” solutions for these business based on HANA might work, but once again the individual companies that will be impacted by a potential shortage can’t afford/buy HANA directly to solve there problems.

          In fact I’m still personally trying to figure out how to justify the cost the AWS run-time environments for ABAP 7.40 stuff on HANA despite the trial license being free, but the looking at anywhere from $40 to $150 per month of server cost time. 

          Finally it violates a good rule of systems design where over-automation of processes can lead to more failure and cost.  I saw a great satire about that topic last night 😉 .

          Take care,

          Stephen

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          1. Jacqueline Prause

            Hi Stephen! Please keep your eye on SAP.info in the coming month. I am preparing a story about a family business in central Mexico that buys and sells consumer commodities, such as beans and rice. They just launched SAP Business One on SAP HANA, with our partner Compusoluciones. I interviewed both the father and son of the business, which has about 360 employees. Mom-and-pop shop? Maybe not, but definitely a growing SME business. They are having the typical HANA customer experience: reports are coming faster into their main office, and now they are looking at ways to maximize the benefits of HANA so that it reaches every employee in their business (their words). I will send you a link when I have the article online. Cheers, Jacki

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  2. Caroline Lewis

    This is an emergency!  But this is also an opportunity to learn from the mistakes of others.  Makers Mark was figuring out how to cope with higher demand with no additional production capacity earlier this year as their popularity continued to grow in China.  They announced that they would be diluting the iconic red-wax sealed bourbon and selling it for the same price.  Customers revolted, their Facebook fans went nuts and they shortly scrapped the plans for a watered down product.  Let’s hope that Sriracha doesn’t take the same approach and finds a way to optimize and plan.  In the meantime, I’m heading to the grocery store on my way home to stock up…

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    1. Tim Clark Post author

      Good points, Caroline. It’s important to remain laser-focused on customers even during times of operational disruption. Makers Mark is a great example. How did they resolve their shortage issues?

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      1. Caroline Lewis

        From what I understand, Makers and Beam Inc. are still trying to figure out the solution likely with great care, given the outcry over their initial approach.  Since it takes on average of six years to age Makers (but it’s all done by taste, so give or take) the root issue is a forecasting one.  Maybe time for some predictive analytics?

        Here is a great post from the WonkBlog in the Washington Post laying out the economics and the different market variables that Makers has to/has been taking into account. 

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