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The Emerging Business of Supply Chain Risk Management

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For many organizations, globalization, outsourcing, and extended supply chains are effective strategies to increase efficiency and achieve economies of scale, however, these benefits are accompanied by the significantly increased risk to quality, safety, business continuity, reputation, and more.

Is Your Company Safe to Work With?

As reported by Forbes, there’s an emerging category of business – supply chain risk management – of which many companies aren’t yet aware.

For the largest companies, this is a jugular area – imagine the exposure of a large oil company or a large online retailer when a supplier they’ve contracted with makes a mistake or even causes an all-out disaster? (Think oil drilling contractor, for example.)

Risk Management Overview

For many organizations, globalization, outsourcing, and extended supply chains are effective strategies to increase efficiency and achieve economies of scale.

However, these benefits are accompanied by the significantly increased risk of quality, safety, business continuity, reputation, and more.

Identifying Risk in the Supply Chain

Organizations are always at risk for losses through cost volatility, supply disruption, non-compliance fines, and safety incidents that cause damage to their brand and reputation.

Knowing what’s at stake is the first step to understanding, measuring, and managing risk in your supply chain.

Supply Chain Safety

Among the highest priorities for companies across all industries, safety concerns are often magnified in chemical, oil and gas, construction, and manufacturing.

Workplace accidents can jeopardize contracts, result in fines, and cause significant damage to a company’s reputation.

Supply Chain Quality Control

Do your vendors and suppliers meet your standards for quality and consistency?

Customers are quick to react when they perceive a drop in quality; and, even the smallest product issues can be difficult to recover from.

Supply Chain Financial Challenges

Any disruption to the supply chain due to financial challenges has the potential to impact business continuity and, ultimately, your bottom line.

Taking a proactive approach to understanding supplier financial strength can prevent disruption and unnecessary costs.

Supply Chain Compliance

Are your contractors insured? Do they have the right type of insurance, the right limits?

Knowing this information will help you to manage insurance risk and avoid potentially costly litigation.

Supply Chain Reputation

Damage to a company’s brand or reputation can be long-lasting, extremely costly, and sometimes unrecoverable.

Committing to a supply chain risk management strategy can not only prevent brand damage but can also serve to foster new partnerships with organizations that share like values.

Supply Chain Sustainability

It’s no longer enough to assess risk within the traditional construct of a supply chain.

Organizations must look beyond and consider environmental impacts and corporate social responsibility, including adherence to labor laws and sustainable practices.

Read more at The Emerging Business of Supply Chain Risk Management

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The Next Revolution in Supply Chain Management

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In the first revolution, the concept of supply chain, as opposed to logistics, was put forth. Constraint based optimization tools for the extended supply chain were developed to support the new philosophy. As this was going on, Lean and Six Sigma approaches to improving capabilities, not just at the factory level, but in other internal departments, as well as across the supplier and 3PL base, were gaining in strength.

It took a while, but it was recognized technology was not enough. The key process in SCM is the sales and operations planning (S&OP) process that balances supply with demand intelligently. S&OP itself is going through a second rev and we now talk about integrated business planning (IBP), a form of S&OP that is more closely aligned with finance. A related “revolution” that improves the demand half of S&OP is based on the concept of demand driven supply chains; this is the idea that it is important to not just create a forecast based on historical shipments, but having real visibility to demand at the point of sale to improve demand management.

In recent years, the topic of supply chain risk management has emerged and new processes and ideas have begun to be codified and turned into a distinct discipline. An emerging topic is supply chain sustainability; and indeed in many corporate social responsibility reports the topics of both supply chain risk management and sustainability are addressed.

Read more at The Next Revolution in Supply Chain Management

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A farm-level view on supply chain water risk

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Managing any kind of risk starts with good information, but collecting and managing water use data up the supply chain can be a surprisingly tough nut to crack.

Agricultural supply chains are highly complex. Willoughby, for example, sells to four shippers who wash and bag his greens before moving them quickly up the supply chain to retailers such as Walmart and food service companies that supply restaurants, colleges and other institutions all over the country.

At the end of this supply chain, Willoughby’s greens are sold as branded bag lettuces, comingled with other growers’ greens. That means his farm level water use data is averaged in with many other growers’ data.

“The longer the supply chain, the weaker the connection between the farmer’s management information and the ultimate consumer,” said Daniel Mountjoy of Sustainable Conservation, which led a recent tour of Willoughby’s fields.

Inexact water use data is more of a problem in fragmented supply chains such as Willoughby’s, where each link acts independently and contracts are subject to change.

“My shipper may say I need five acres of red lettuce on May 30,” Willoughby explained, “but when May 30 comes around, they’ll say, ‘Actually I only need half of what you grew.’”

That’s because his shippers are at the mercy of restaurants and grocery store chains’ forecasting models.

Read more at A farm-level view on supply chain water risk

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Top fashion labels save millions from China’s sustainable supply chain

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A leading group of Chinese textile mills, which create clothing for major high-volume apparel brands and retailers including Target, Gap, Levi Strauss and H&M, are saving $14.7 million each year by adopting simple efficiency measures in their production processes, according to a new analysis by the US Natural Resources Defense Council (NRDC).

These improvements have dramatically reduced the pollution generated by these mills, cutting up to 36 percent of water use and 22 percent of energy use per mill and a total of at least 400 tons of chemicals.

The 33 mills are part of NRDC’s Clean By Design program, a global model for manufacturing sustainability that is working with major fashion retailers and designers to green the fashion supply chain industry-wide.

“Great fashion can also be green fashion. Although apparel manufacturing is among the largest polluting industries in the world, it doesn’t have to be,” said Linda Greer, Ph.D., NRDC senior scientist and director of Clean By Design. “There are enormous opportunities for the fashion industry to clean up its act while saving money, and Clean By Design offers low-cost, high-impact solutions to do just that.”

Over the past two decades, China has become the epicentre of global manufacturing, and it currently produces more than 50 percent of the world’s fabric, totalling more than 80 billion meters annually.

As a result, the country is suffering from increasingly serious pollution problems while also contributing significant carbon into the atmosphere. Textile manufacturing, particularly the dyeing and finishing of fabric, is incredibly water and energy intensive as the process swallows up to 250 tons of water for every 10,000 meters of fabric produced and consumes 110 million tons of coal every year.

Read more at Top fashion labels save millions from China’s sustainable supply chain

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