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The growing importance of supply chain risk management

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The growing importance of supply chain risk management

The growing importance of supply chain risk management

Against the backdrop of a highly disruptive and volatile market environment, supply chain risk management has risen to the top echelons ofboardroom agendas. Vivianne Courte-Rathwell, a Consultant at Sourcing Champions, explains why the concept is gaining importance – and outlines some of its main benefits.

A review of the historic supply chain disruptions of the past few years would hardly be news to anyone. In an unprecedented ‘risky’ period, with a pandemic, climate change, a Russia-Ukraine war, geopolitical pressures, and much more, it is no surprise that global supply chains have recently been dealing with heightened risks.

However, it is key to keep in mind that such disruptions do not only occur in unfortunate periods of history. Risks are by nature ubiquitous and unpredictable, and that means that leaders need to embrace an approach that helps them mitigate, adapt and learn.

In 2012, there was a disastrous tsunami in Japan which impacted the automotive industry worldwide. In 2015, an immense explosion at one of the largest ports in the world, the Port of Tianjin, caused significant costs and losses. In 2018 the US – China trade war negatively impacted profit margins and created tense times of uncertainty.

It is impossible to conceive to avoid all risks. Instead, the key is to mitigate significant damages through foresight in strategic management.

After the tsunami of 2012, automotive organizations had nowhere to turn as many realized that their single source of materials was Japan. Even OEMs with a multi-sourcing strategy encountered issues because many tier-1 suppliers procured materials from the same tier-2 supplier. As a result, the challenges of tier-2 suppliers became a direct concern as well.

Had there at the time been a multi-layer supply chain risk management (SCRM) program in place, these issues could have been (easily?) avoided and impact to the business would have been minimized. SCRM tools and processes act as guardrails and shields protecting the business from potential perils, hence providing a competitive advantage.

Read more at The growing importance of supply chain risk management

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Resilient Supply Chains in a Politically Uncertain World

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Resilient Supply Chains in a Politically Uncertain World

Resilient Supply Chains in a Politically Uncertain World

The Resilient Supply Chain

Today, the supply chain world iterates faster than at any other point in history. Disruptions – whether related to climate change, trade wars, or a no-deal Brexit – are a given, and black swan events aren’t surprises anymore. We know that the next event is coming fast and supply chains will have to react. So why have we not burned that understanding into our business DNA? Why are we still trying to leverage strategies developed 50 years ago and technologies unaligned to today’s needs?

What I mean is that every supply chain, everywhere, should be prepared at a moment’s notice to shut down, pivot, and spin up whatever operations it needs to, wherever it needs them. I’m of the strong opinion that if supply chain professionals reframe their thinking and look at uncertainties as opportunities then they will thrive. This thought came to me while reading an article on US trade disputes with China, or maybe it was an article on Brexit.

While I understand how conflicts arise, I have a hard time accepting why they are as adversely impactful to supply chains as they are. Contingency planning should cover for every possibility, and the overreliance on any single supplier or region is not smart business anymore. If the year was 1492 or 1839 or 1979, I could understand the desire to optimize a linear supply chain. That’s not the case today. With the advent of cloud technology and the reality of global markets – fallout from any one country’s instability or trade war can be mitigated.

Three Legs of a Resilient Supply Chain:

  1. Availability: For systems to work they need to be ON. As long as power and cloud servers exist, then a supply chain cannot be existentially threatened.
  2. Operational Flexibility and Configuration: Facilities available on a single network eliminate siloes and allow for customized configuration.
  3. More Control: Control is based on visibility, on knowing and seeing exactly where inventory is all the time.

What About Lost Goods?

Declare them lost, minimize losses, and deal with the repercussions.

Over the last two generations, western economies relied on an uncompetitive market to produce goods. Since 2010 the world has effectively been relying on an industrial monopoly.

It may have seemed like a good idea to rely on a single, cheap source of manufacturing fifty years ago. However, by choosing this path, countries damaged their own manufacturing economies.

They also exposed themselves to the exclusive possession and control of that same, supplier. That’s when the system naturally started to collapse. And that’s when the world began to see price-fixing and currency manipulation, among other signs of deterioration. What would you do if you ran a monopoly?

A dearth of suppliers is what companies are now contending with. There is no easy way out.

Read more at Resilient Supply Chains in a Politically Uncertain World

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