Tag Archives: Risk

Top 25 Risk Factors for Manufacturing Supply Chains

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According to a recent report from BDO USA, an accounting and consulting organization, manufacturers’ intellectual property, supply chain data and products have become prime targets for cyber criminals.

The 2016 BDO Manufacturing RiskFactor Report examines the risk factors in the most recent 10-K filings of the largest 100 publicly traded U.S. manufacturers across five sectors including fabricated metal, food processing, machinery, plastics and rubber, and transportation equipment.

The factors were analyzed and ranked by order of frequency cited.

Manufacturing Industry Serves Up New Risks

The manufacturing industry is getting mixed reviews.

The Institute for Supply Management (ISM) Index reported that activity was up in April after five straight months of declines.

Then, in late May, the Purchasing Manager’s Index reported the first reduction in output since September 2009.

In the trenches, manufacturers say domestic demand has been solid, while global business has been more challenging. And the end customer matters: in a recent earnings call, Caterpillar’s CEO noted, “Just about any market that’s away from oil is doing pretty good.”

“Pretty good” is a modest but realistic goal for manufacturers this year, and their top concerns echo this cautious optimism. The annual analysis of the most frequently cited risk factors found the supply chain remains at the top of the list – cited by 100 percent of manufacturers we analyzed – while emerging and growing risks in cybersecurity, competition, labor, pricing, regulations and international operations are also keeping manufacturers up at night.

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Why Supply Chain Risk Management is Key to Supplier Management

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While brand damage can be quite costly to the businesses whose sales rely strongly on the customer loyalty they generate from their brand strength, cost volatility and supply disruption is very costly to all manufacturers. In fact, in the latest 2015 study by the Business Continuity Institute, supply chain disruption is double in priority relative to other enterprise disruptions and over three-fourths of respondents cited that they had at least one recent (significant) disruption. The same percentage didn’t have full visibility of their supply chains.

While category management can address and even reduce supply chain risk by ensuring a chosen strategy has the right level of resiliency, prevention and agility, it cannot prevent risk or do much to eliminate the source of risk once something has happened. That can only be done by each party in the supply chain doing everything they can to eliminate the risk. In particular, a supplier needs to do all they can to minimize the risk on their end.

However, not all suppliers are as advanced in supply chain management, and in particular, risk management as the buying organization. That’s why good supplier management combined with SCRM is key. Good risk management is a combination of risk prevention and risk mitigation when a risk is detected. Risk prevention involves selecting suppliers, products and services that are low risk and risk mitigation involves taking action as soon as an indicator is detected.

A supplier is not always good at mitigating or even detecting risk in its supply chain, or may overlook an obvious sign that an observant buyer would not, which is why proper supplier management is key. This begins even when qualifying suppliers. Including risk criteria related to the supplier and supplier location gives a good indication of a supplier’s the risk level. Besides the supplier qualification criteria, supply location-related risks provide an overview on potential threats like natural disasters, political situation, sanctions or economic risk. This gives buyers the chance to take preventive actions.

Read more at Why Supply Chain Risk Management is Key to Supplier Management

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How to Better Manage Supply Chain Climate Risks

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Supply chains are responsible for up to four times the greenhouse gas emissions of a company’s direct operations and yet half of major companies’ key suppliers don’t provide requested climate data to their corporate customers, according to a study produced by CDP and written in partnership with BSR.

The report also gives examples of ways companies can encourage supplier performance. It says L’Oréal works with CDP to create supplier climate scorecards that can be easily understood in the purchasing department.

Additionally, Coca-Cola and Lego Group are both experimenting with incentives and training for suppliers that aim to improve climate performance. Coca-Cola, for example, encourages suppliers to implement sustainable agricultural practices, reduce material used in packaging, and reduce the carbon footprint of vending machines. Lego Group LEGO Group is hosting “innovation camps” that the report says not only identify projects to reduce CO2 emissions, they also strengthen partnerships with suppliers.

Read more at How to Better Manage Supply Chain Climate Risks

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How to recover from supply chain disruptions

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Risk mitigation is a crucial component of supply chain management. Preparing for potential disruptions is one of the most important yet challenging tasks faced by company managers, especially since there is an abundance of possible situations threatening operations at all times.

Unfortunately, damage control planning is something many companies tend to neglect. Last year, a study conducted by the supply chain management team at the University of Tennessee found that only about 50 percent of businesses have a recovery process in place to reference in the event a facility’s operations are interrupted.

Importance of response planning
Companies of all sizes are susceptible to dangerous disruptions, with global supply chains being the most vulnerable. Which is why it is surprising that the report also discovered nearly all, or 90 percent, of surveyed organizations do not take potential risks into consideration when outsourcing.

It’s understandable that managers are generally more focused on improving day-to-day operations, such as customer service, identifying cost-savings opportunities and driving revenue. However, disruptions along the supply chain have the power to severely impact financial growth and overall performance.

Between natural disasters, security breaches, safety and regulatory compliance and system failures, it is virtually impossible to anticipate what will be affected and when attacks may occur. But the best approach for supply chain teams to take is implementing strategic risk management practices that will help minimize monetary losses associated with disasters.

Read more at How to recover from supply chain disruptions

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5 Data-Driven Supply Chain Challenges to Overcome in 2016

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Supply chain, sourcing and procurement executives are feeling immense pressure to cope with the expansion into global markets, waves of disruptive innovation, rising customer expectations and complex regulatory requirements. These are catalysts that require supply chain management strategies to become bimodal and to make a shift from tactical to strategic.

In addition to the sourcing of goods and services, cost management and internal stakeholder compliance, executives’ responsibilities will include the ability to promote and support the top line. They have to be a trusted advisor to internal business partners and will have a tremendous impact on the success of an organization engaging with suppliers, managing relationships with strategic vendors and solving business problems.

For 2016, I see leading supply chain organizations making these top-five data-driven supply chain management challenges a priority.

1. Meet Rising Customer Expectations on Supply Chain Management

2. Increase Costs Efficiency in Supply Chain Management

3. Monitor and Manage Supply Chain Compliance & Risk

4. Make Supply Chain Traceability and Sustainability a Priority

5. Remain Agile and Flexible in Volatile Times and Markets

Read more at 5 Data-Driven Supply Chain Challenges to Overcome in 2016

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Beware the ‘black swans’ in your supply chain

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Enterprises know that merely having a supply chain involves a certain amount of risk, but few do enough to protect against the one-off, extreme incidents that can disrupt them.

That’s according to Yossi Sheffi, an MIT professor who is director of its Center for Transportation & Logistics.

Such events — sometimes referred to as “black swans” — include unanticipated catastrophes such as Hurricane Katrina, the BP Horizon oil rig explosion, the 9/11 terrorist attack, the tsunami that hit Japan in 2011, and even the Volkswagen emissions scandal.

While most risk-planning processes focus on events that happen relatively often, such as routine weather emergencies, they often ignore the extreme ones that are considered too unlikely to worry about, Sheffi argues.

While such events are unlikely, the probability that they’ll happen isn’t zero — as history has proven again and again.

“Black swans are never expected,” Sheffi said in an interview. “There are many examples of low-probability, high-impact disruptions. People don’t believe they can happen, but they do — and there will be more.”

Vendors such as Resilinc and Elementum along with IBM, SAP and Cisco are increasingly coming out with software to help companies protect themselves, he noted.

Read more at Beware the ‘black swans’ in your supply chain

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4 steps to better manage global supply chain risks

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To better manage global supply-chain risks and address any warning signs of fraud, abuse, and waste, Deloitte suggested companies take these four steps:

  • Know your supplier to identify and prioritise risk.

Gather information internally and externally to identify potential risks involving suppliers and business partners, including what relationships to government entities they have, how they are compensated, what the scope of the relationship is, and what compliance programmes they have. Run a background check on suppliers to detect potential risk indicators.

  • Map the volume of products flowing around the world.

Use mapping software to visualise product flows as lines whose thickness represent corresponding volumes. This type of map can reveal vulnerabilities, such as large volumes of supplies flowing into high-risk regions.

  • Identify, investigate, and confirm anomalies.

Review transactions for accuracy, authorisation, existence, and approval. Look for anomalies by, for example, assessing the responsiveness of the supplier, checking the information of an invoiced item and the rate charged, looking for any notations providing information about a transaction. Get documentation to vet gathered transaction data.

  • Track, manage, and learn from the information.

Establish a supplier database that contains compliance and risk data, such as audit history, total spend, and geographic location. Sort suppliers into risk tiers to help prioritise, manage, and enact corrective action plans.

Read more at 4 steps to better manage global supply chain risks 

Do you have any tips to add into the list? Share with us in the comment box below.

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Cloud-Based Supply Chain Faces Scrutiny

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Cloud-Based Supply Chain Faces Scrutiny

As the supply chain looks for new tools to manage increasing complexity, as well as a need to manage risk and other variables quickly and proactively, cloud-based solutions, which are relatively underutilized today, will become more common.

What are some of the common misconceptions around cloud computing and supply chain applications?

Supply chain has generally been a very slow adaptor to new technologies, and cloud computing is no exception. Besides data security and ownership, other factors come into play around how the infrastructure would behave in terms of excess volumes and concerns the in-house IT team may have with feeling helpless when it comes to issues around performance, managing downtime, and handling end customer pressures.

Often, lack of management support is cited as a reason for not adopting cloud technology. Why do you think the corner office is reluctant to support these sorts of initiatives?

Not all senior managers have yet to fully understand the implications of moving into cloud. They still look it as a pure cost saving initiative vis a vis the risks and the litigations they may end up facing in case they encounter issues around their data. Managers would like to hear success stories that [demonstrate that the concerns about] data security are all addressed by big product vendors, which are now moving over to cloud.

What are the best ways that supply chain managers can “speak the language” of business leaders to quantify the potential benefit of cloud-based apps for the supply chain?

The ROI of moving to a cloud-based service is very fast. Customers need not invest in capex for their expensive infrastructure, licenses, and upgrades. This can be very easily worked out. Another factor is that often, companies invest in large IT teams and have to constantly manage them – thereby deviating and investing in a division that is not their core business. By moving to the cloud, they can overcome this by maintaining a lean IT team.

Do you have any personal views about utilizing cloud-based system? What do you think are the advantages and disadvantages?

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6 Steps To Supply Chain Risk Management Success

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6 Steps To Supply Chain Risk Management Success

Lean production may traditionally be considered the linchpin that holds successful supply chain management together, but reducing your exposure to risks is becoming a key priority for maritime companies.

Our dependence on, and partnerships with suppliers, whether it be via outsourcing or mitigating stock opens up a whole world of exposure for marine businesses and their procurement teams. That’s why risk management is so crucial to the supply chain.

Navigating risks really is the key to management success. With the global expansion of supply chains comes ever more complicated business structures and so countless issues can arise causing disruption, delays and ultimately money going down the drain.

Both buyers and suppliers can be hit by a number of unavoidable problems. From natural disasters to terrorism or cyber attacks. Each problem can have big effects on both upstream and downstream partners.

So what can you do to mitigate risk?

The best way to reduce exposure is to make sure you and your company keep up to date with developments in the maritime sector. And to follow a few key steps…

1. Choose your suppliers carefully

Conduct audits of your suppliers on a regular basis and if necessary, inspections to make sure they are committed to risk management like you are.

2. Authenticate suppliers’ insurance cover

It’s worth remembering that a certificate of insurance is only evidence of the insurance cover as it was when it was written.

3. Clearly define contract scopes and draft contracts

Be careful when defining contract scopes and draft contracts.

4. Understand the extent of your exposure

How much risk are you and your business exposed to?

5. Put a plan in place

Identifying risks is the easy part, now you have to get an action plan in place.

6. Lower the threat of risk by purchasing the right cover

Making sure your policy covers your company’s specific exposure mix and risk tolerance is important.

Do you have any ideas to add regarding risk management in supply chain? Share your opinions in the comment box or send us a message for discussion.

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Step by Step Supply Chain Risk Management

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Supply Chain Risk Management Step by Step

Managing risk in the supply chain can be a daunting task. Supply chain managers increasingly realize that protecting their supply chains from serious and costly disruptions. But often they don’t take action, because they are paralyzed by not really knowing how to start.

Zurich’s 2014 Supply Chain Resilience Survey puts some figures on the problem:

  • 73.5% of organizations surveyed said they do not have full visibility into their supply chains.
  • 76% of respondents reported at least one instance of supply chain disruption last year.
  • 44.4% of disruptions originate below Tier 1 suppliers.
  • Loss of productivity (58.5%), increased cost of working (47.5%), and loss of revenue (44.7%) were the most commonly reported consequences of supply chain disruptions.
  • 28.6% reported low mangement commitment to the issue of supply chain resilience.

Taking a step-by-step approach can help. Solid planning, carefully planned and executed, not only reduces risk but also can increase supply chain efficiency, enhancing the organization’s bottom line.

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