Posts tagged "SCRM Best Practices"

Combine Agile Supply Chain Concepts with Resiliency for World-Class Supply Chain Management Results

November 5, 2015 Posted by Supply Chain Resiliency, Supply Chain Risk Management 0 thoughts on “Combine Agile Supply Chain Concepts with Resiliency for World-Class Supply Chain Management Results”

Author: Madhura Kulkarni

Agile supply chain managementAcross industries, companies are struggling to manage inventory in complex global supply networks, trying their best to match smooth uninterrupted supply with increasingly volatile customer demand. Inventory shortages often freeze operations and sometimes cause shutdowns, costing companies their profits and public image. To avoid potential shortages, enterprises often over-stock, effectively stalling functional capital and hurting the returns on equity and assets.

In a volatile supplier market driven by uncertainties and risks, many companies are opting for agile processes and systems for more effective supply chain management.

The key characteristics of an agile supply chain are its flexibility and resiliency. It's important to differentiate this concept from the ethos of lean supply chains and lean manufacturing, which focuses primarily on trimming “fat” (e.g. inventory, cost) wherever possible.

Agile Advantage:

Agility is defined as the ability to respond rapidly to unexpected changes and events while maintaining consistent customer service levels, service level agreements, liquidity, and cost structures (The Agile Supply Chain, n.d.).

Research by McKinsey & Company indicates 94% of companies implementing agile supply chain practices could deliver, on-time and in-full, while maintaining inventories of no more than 85 days. Companies that failed to follow agile practices maintained 108 or more days of inventory and managed 87% on-time deliveries.

Developing Agile Systems:

Agile systems are dynamic and market sensitive. Responding to real demand efficiently, they equip enterprises to be resilient in the face of demand fluctuations and supplier disruptions by allocating and reallocating inventory where and when needed by reading and responding to real demand efficiently. Thus, the ability to swiftly react to and mitigate supplier continuity risks (e.g. extreme weather, factory fires, labor strikes, and geo-political, market, and financial crisis), is also key to achieving supply chain agility. Here are some important design principles when developing agile processes and systems:

  • Demand Management and Forecasting. Rather than focusing on traditional ‘push’ models for supply chain demand management that are driven by a view of orders, shipments, and inventory, invest in more dynamic agile ‘pull’ models that are consumer centric and driven by real market trends and point-of-sale demand data. This will facilitate precision in forecasting and responsiveness (Johnston, n.d.). The goal is to manage virtual supply chains that are information based rather than inventory based.
  • End-to-end Collaboration. Collaborate with carriers, suppliers, and logistics providers to understand better opportunities to improve business term flexibility, operational savings, and demand, capacity, and business continuity planning. Specifically, leverage customer relationships efficiently to improve demand visibility and supplier relationships to improve disruption visibility and time-to-recovery. Advanced forms of collaboration incorporate process integration using automated systems, e-business solutions, etc.
  • Responsive Systems and Analytics. Develop responsive sales and operating plans to incorporate supply, demand, financial results, inventory, and customer service, based on a robust analytic capability.
  • Resilience and Risk Management. Incorporate capabilities for proactive supply and demand chain risk identification, quantification, and prioritization, as well rapid incident and crises response (e.g. 24/7 supply chain event detection, monitoring, and impact analysis).
  • Design for Agility. Leverage “design for agility” or “design for resiliency” concepts which identify and remediate product design decisions which can negatively impact product availability, such as choosing non-standard components requiring single or sole sources.
  • Process Ownership. While defining the S&OP policies (The Agile Supply Chain, n.d.) ensure that accountable authorities are assigned to drive process changes and on-going change management.

 

References

Christopher, M. (n.d.). Creating the Agile Supply Chain. Cranfield School of Management.
Jari Collin, D. L. (2006). Plan for supply chain agility at Nokia. Emerald Group Publishing Ltd .
Johnston, D. (n.d.). Building an Agile Supply Chain. Retrieved from http://www.jda.com/: http://www.jda.com/realresultsmagazine/view-article.cfm?did=705
Raoul Dubeauclard, K. K. (2015). How agile is your supply chain? McKinsey Quarterly.
The Agile Supply Chain. (n.d.). Retrieved from www.TCS.com: http://www.tcs.com/SiteCollectionDocuments/White%20Papers/Agile-Supply-Chain-0914-1.pdf
The Network Approach to Inventory Management . (2015). A GT Nexus White Paper.

Rethinking Black Swan Events for Modern Supply Chain Risk Management

October 29, 2015 Posted by Supply Chain Event Monitoring, Supply Chain Risk Management 0 thoughts on “Rethinking Black Swan Events for Modern Supply Chain Risk Management”

Author: Wayne Caccamo

Black swan supply chain events have been traditionally associated with (if not formally defined as) improbable, rare, or unlikely events that have severe or even catastrophic business impact. However, as a result of a number of socio-economic factors it’s time to update our view of black swan supply chain events.

A Black Swan Event is Not a Rare Occurrence

building-earthquake.jpgFor a number of reasons, black swan events are becoming less rare. It may sound logically inconsistent to describe such events as both becoming less rare and at the same time improbable or even unimaginable. How can that be?

It’s important to distinguish between the unique characteristics or circumstances associated with a singular event and the collective probability that at least one of these singular events will happen over a given period of time. After evaluating the surrounding context, looking backward domain experts (and in some cases even laymen) can usually conclude most black swan events are bound to happen and are destined to repeat themselves. Only the Chicago Cubs seem to defy this principle. Even though some parameters may differ (such as the event’s time, location, or specific type), it is likely that many similar incidences have had similar effects in the past and that this will continue in the future.

In fact, Yossi Sheffi, author the recently published The Power of Resilience guarantees that future disruptions are going to be bigger than anything we have witnessed to date because the past is bounded and the future is unbounded. He warns, “sometime in the future, something really bad is going to happen.”

SCRM Lesson: While black swan events may make headlines, they should be addressed with the same basic approach as all other supply chain disruption events and risks. According to Sheffi, a general capability and process needs to be developed to proactively identify, quantify, and prioritize risk scenarios for mitigation, as well as processes for early detection and rapid crisis response. After all, business impact of every day minor supply disruptions and delays in aggregate typically far surpasses that of the less frequent, but more severe black swan event.

The Frequency of Black Swan Events is Accelerating

Now that we are more comfortable with the notion that black swan events—though in many cases unimaginable, are not rare—it’s a small leap to accept that black swan events will happen with increasing frequency. Note, a key element of our black swan supply chain event definition is the degree of business impact. Globalization means that the impact of events is less localized and therefore more impactful. Further, a key driver for extreme weather-driven black swan supply chain events is climate change – a socio-economic challenge that will not be addressed or reversed anytime soon. Moreover, technology and hyper-connectedness of suppliers, brands, and OEMs make cyber disasters more likely and impactful. Finally, escalating geopolitical unrest can be one element of a perfect storm resulting in a black swan event.

SCRM Lesson: Don’t be preoccupied with the rarity, the unprecedented, or unimaginable nature of black swan events. This leads to a defeatist and illogical conclusion that supply chain risk management is futile. Focus on mitigating the business impact regardless of event timing, severity, type, location, etc. with proactive risk mitigation strategies prioritized by value-at-risk.

An Event Can Achieve ‘Black Swan’ Status Base on the Response Rather than the Event Itself

Hurricane Katrina (2005) may be considered a black swan event, but not because disasters of that magnitude were unprecedented, unimaginable, or that its particular location and specific type was unforeseen. Everybody knew that the city of New Orleans is at the base of a geographic soup bowl, whose brim once breached could lead to epic flooding. Hurricane Andrew back in 1992 raised that spectre. What most could not imagine is that an extreme weather event could wreak that much havoc in the U.S., and how poor the disaster preparation and federal crisis response could be.

SCRM Lesson: Planning and response preparedness can head off a potential black swan event before it goes down in history as such.

In sum, the general answer is to build a resilient enterprise that anticipates, prepares for, and responds rapidly to all types of events, ranging from the severe “black swan” variety to every-day supplier disruptions and delays.

Defining Supply Chain Risk Management Program Objectives

June 2, 2015 Posted by Uncategorized 0 thoughts on “Defining Supply Chain Risk Management Program Objectives”

Author: Wayne Caccamo

Supply Chain Risk Management Business DriversIn the Ultimate Guide to Supply Chain Resiliency Program Success, we provide supply chain risk management practitioners with concrete suggestions and guidance on how to create, roll-out, and institutionalize a global supply chain resiliency program (SCRP). As part of the “PLAN” phase we discuss the need to describe the strategic context and influences by describing the key business drivers. Key supply chain risk management business drivers we identified include:

  • Supply chain networks are larger, leaner, more global, more interdependent, more complex, less transparent, and changing more frequently.
  • Customer expectations continue to grow.
  • Commodity costs are increasing.
  • Logistics capacity remains constrained.
  • Natural disasters impacting globalized supply bases are on the rise as a result of global warming.
  • Brand risks are increasing as a result of supplier compliance, corporate social responsibility, and security practices.
  • New product introductions have been more frequent.
  • Products and services have become less standard.

I would love your input on this list. What am I missing? I am particularly interested in the drivers that are unique to your industry, geography, company scale, or other business context.

The next key step in the supply chain risk management program planning process is to identify your strategic and tactical objectives. In the Ultimate Guide we identified the following potential strategic and tactical objectives that can be used as a starting point for brainstorming. Again, what is missing? We all need to hone our collective ability to make the business case for investing in supply chain risk management strategies, processes, and tools. So, this is my attempt to crowd-source your input.

Sample Strategic Objectives

  • Achieve competitive advantage (turn business disruption threats into opportunities)
  • Protect brand value and customer satisfaction (based on customer service level data)
  • De-risk revenue and time to market goals
  • Decrease operational costs
  • Protect shareholder value
  • Ensure continuity of supply through a controlled, predictable response
  • Manage regulatory/compliance exposures

Sample Tactical Objectives

  • Decrease supply chain-related insurance premiums
  • Facilitate supplier collaboration and information sharing
  • Avoid supply chain costs (e.g. component buy-aheads, emergency second sourcing, expedited freight, etc.)
  • Reduce inventory
  • Improve supplier quality
  • Improve lead times and variability
  • Improve delivery/order fulfillment performance (on-time, variability)
  • Reduce number of supply crises impacting critical products or parts
  • Reduce incident response times and time-to-recover for the highest priority supply chain activities, products, and services
  • Improve supply chain asset utilization and inventory turns

Here’s some parting advice on developing your own list of strategic and tactical objectives. First, aim for strategic and tactical goals that are ambitious, yet achievable. Second, ensure program strategies drive or support C-level corporate strategies. Don’t forget to consider tactics that may be viewed as transformative (i.e. fundamentally change the way supply chain risk management processes are performed today). Make sure you package strategic objectives and tactics into a simple statement of purpose and goals that can be easily shared and understood. And, finally, position SCRP purpose and goals as complementary and accretive to existing enterprise risk programs.

To learn more about how to how to build out a global supply chain resiliency program (SCRP), check out the Ultimate Guide.

Sharing Business Continuity Plans Benefits Both Suppliers & Customers

May 20, 2015 Posted by Supply Chain Resiliency Management, Supply Chain Visibility 0 thoughts on “Sharing Business Continuity Plans Benefits Both Suppliers & Customers”

Author: Bindiya Vakil

Business continuity management (BCM)'s scope is perceived largely as internal to company's operations. In today's environment, biggest risks are from raw material suppliers or external partners.

Increase your company's supply chain visibility with ResilincWith any supply chain disaster, the rippling effects of factory damage or shut downs can be immediately felt. Take the 2011 Japanese earthquake, as an example. Factories affected by the disaster were shut down, resulting in parts shortages at major suppliers which caused lines down and factory down times at large automotive manufacturers.  The impact rippled through the supply chain layers.  High tech, automotive, aerospace and other sector companies quickly found out that some of their suppliers were located or dependent on Japanese manufacturing facilities days and weeks after the event.  Many supplier dependencies were not identified until much later.

I believe that in any case of supply chain disasters, there are major supplier information “blind spots” that you likely have experienced firsthand, as a supply chain practitioner.  These information black holes are around suppliers’ manufacturing locations, sub-contractor dependencies and business recovery strategies.  But mapping out the entire supply chain across all layers can seem like an insurmountable challenge.  However, a good starting point is to take all the direct suppliers and map their manufacturing locations, alternate sites and collect information about how and where they plan to recover business in case of a major crisis.

Supplier or partner Business Continuity practices & recovery plans are largely unknown by most companies. The 2010 BCI Survey reveals that only 7% of companies have been able to get suppliers to adopt business continuity planning.  Of these companies, only 50% have gotten suppliers to share details about their business continuity practices.

This makes managing disastrous events and supply chain risk extremely challenging, not only for the customers, but also for the suppliers impacted by the event!  In the immediate follow up to an event, suppliers are busy trying to assess impact, account for people and damage to facilities and taking recovery actions.  Their customers are reaching out with questions like: did you have a facility here, what did you build for me in this facility, are there other sites where you can build this, are these sites currently building this part, if not, are they qualified etc.  How long before the alternate site will be up and running?  How long will allocation last? When you multiply these questions by the hundreds of customers who are thrown in a spin, you have a truly chaotic scenario.

Critical supplier resources are then busy responding to customer inquiries and unable to focus concentrated efforts on the really critical activities such as: assessing damage, activating continuity plans, moving people, tooling, resources, equipment, re-routing raw materials, bringing up alternate sites and sources, placing new POs, coordinating repairs and resuming supply etc.  This further compounds delays – suppliers and customers both lose in this scenario.

Providing business continuity plan information proactively to customers helps suppliers too!  They can reduce the amount of inquiries and improve the type of questions they have to face in a crisis.  If their customers already know where parts are built, what other sites can build them, how long it takes to recover etc. then the conversation can be: what can we do to help speed up your recovery? After all, this is at the heart of the problem.  In a supply chain disruption, both parties are hurting and it is in both parties’ best interest to gain the fastest recovery possible.

There is an important take away in any crisis - what we can do so next time we are better informed, better prepared, more resilient, more collaborative etc

Supplier business continuity information is not a ‘nice thing’ to have – it is a strategic priority for customers, has important benefits for suppliers and can really help companies to change the language of crisis response.  It is a connected world out there. E.g. automotive and its dependence on high tech suppliers.  Business continuity information sharing can change the language of crisis response.


Bindiya Vakil is the CEO and Founder of Resilinc. You can read more of her series here.

Proactive Supply Chain Risk Mitigation: The Brazil Drought & Impact

May 15, 2015 Posted by Uncategorized 0 thoughts on “Proactive Supply Chain Risk Mitigation: The Brazil Drought & Impact”

Author: Charlotte Hicks

Brazil-flag-drought-bcpRecently, Resilinc has been closely monitoring reports concerning Brazil’s severe drought. As we enter an El Niño in 2015, Brazil can expect drier weather for the next few months further exasperating the situation. While droughts may be a primary concern to farmers, there are also downstream impacts to the global supply chain in terms of water supplies, power supplies, and raw materials that could impact product customers.

Water Rationing Impact: All Markets

As supplies of waters dwindle, some cities are faced with severe water rationing. In São Paulo, the rationing is as severe as 5 days with no water (Ortiz, 2015). While we cannot accurately predict the exact impact, we can look at a similar situation that occurred in Malaysia last year (Bloomberg Business, 2014), where glove manufacturers were faced with cutting production or having water trucked in. The result was back orders on some cleanroom apparel items as well as price increases.

Risk Mitigation Strategy: Brazil is an exporter of therapeutics as well as automotive and electronic components. Planners should identify products manufactured in Brazil and potentially increase inventory levels and lead times temporarily.

Power Supply Impact: All Markets

Electricity can be generated in several ways such as natural gas, coal, and solar. In Brazil, the key source for power is hydroelectric, with over 70% of its electricity generated by hydroelectric dams (Johnson & Jelmayer, 2015). As the drought continues to strain water supplies, the power grid will also be strained resulting in potential blackouts and/or rationing. While many manufacturers have backup power, some downstream service providers may not.

Risk Mitigation Strategy:
All production sites who have subsidiaries, suppliers, and sub-tier suppliers in Brazil should review their suppliers’ Business Continuity Plans for information for information on their backup power capabilities. Keep in mind that while a business may have back-up power, other parts of the supply chain may not have back up power, such as third-party logistic hubs.

Raw Material Impact: BioPharma

Brazil is a major global exporter of agricultural products, such as corn, soy, and sugar- the primary building blocks in media and excipients. With the drought, harvests of these materials is expected to be lower than normal in the 2015 growing season. The good news is that an El Niño creates wetter and more favorable growing conditions in the US Midwest for stronger harvests of corn and soy.

But sugar on the other hand, is a tropical crop. The top producer of sugar globally is Brazil with India in second. Both countries are usually impacted negatively by an El Niño with lower sugarcane harvests. Right now, sugar prices are kept in check dues to excess sugar inventories (Hecht, 2015). However, the sugar harvests in Brazil are expected to be 9-10% lower than prior year (Lewis, 2014) and creates a price risk for BioPharm customers.

Risk Mitigation Strategy:  Commodities such as sugar, as well as corn and soy, are the building blocks for many materials media, amino acids, citric acid, ethanol, and excipients. BioPharm planners in particular need to be aware of the Brazilian drought situation and monitor back order reports for signs of tightness in sugar supplies as well as other components that can be impacted by an El Niño.

In summary, the drought situation in Brazil is extremely serious, and with the rainy season ending and an El Niño beginning, relief is not in the immediate future. While our hearts and thoughts are with those impacted by the drought, we can also help partners mitigate their raw material, water, and power constraints by being flexible and planning for bumps in their supply chain.


Read more about business continuity planning tools to mitigate supply chain risks here:

References

Bloomberg Business. (2014, April 15). Malaysian Glove makers Facing Production Halts on Water Cuts. Retrieved from Bloomberg Business: http://www.bloomberg.com/news/articles/2014-04-15/malaysian-glove-makers-face-production-disruption-on-water-cuts

Hecht, A. (2015). Sugar- a sweet commodity in a sour market. Seeking Alpha, http://seekingalpha.com/article/3001896-sugar-a-sweet-commodity-a-sour-market.

Johnson, R., & Jelmayer, R. (2015). Brazil Blackouts Spawns Power Rationing Fears. The Wall Street Journal World, http://www.wsj.com/articles/brazil-blackout-spawns-power-rationing-fears-1421784617.

Lewis, J. (2014). Fire and Drought Scar Brazilian Sugar Crop. Wall Street Journal, http://www.wsj.com/articles/fire-and-drought-scar-brazilian-sugar-crop-1411487285.

Ortiz, F. (2015, February 16). Brazil faces water rationing amid worst drought in 84 years. Retrieved from RTCC news: http://www.rtcc.org/2015/02/16/brazil-faces-water-rationing-amid-worst-drought-in-84-years/

HBO’s “Last Week Tonight” John Oliver on Supply Chain Visibility

May 1, 2015 Posted by Supply Chain Visibility 0 thoughts on “HBO’s “Last Week Tonight” John Oliver on Supply Chain Visibility”

Author: Wayne Caccamo

Did you catch John Oliver’s tirade on apparel industry supply chain practices? In a segment of his show that aired earlier this week, the case for supply chain risk management and visibility investments was made by an unlikely source. The popular TV program’s scathing indictment of the supply chain practices of the likes of H&M, Walmart, Nike and the Gap is, in and of itself, proof of the brand risk associated with complex globalized supply chains.

last-week-tonight-sc-visibility

Oliver asked how is it that companies can charge as little as $4.95 for a dress (comparing that to the $5 price point of a jar of cricket food) and yet still be “massively profitable.” He then proceeded to trace the roots of incredibly cheap apparel to exploitative labor practices and working conditions in developing countries.

“Sweatshops aren’t one of those 90s problems we got rid of, like Donnie Wahlberg,” said Oliver. “They’re a 90s problem we’re still dealing with, like Mark Wahlberg.”

And, despite increased monitoring, worker age verification, safety and other measures companies claim have been implemented, the problem arguably has only gotten worse as a result of the accelerated pace of globalization. As late as 1990, 50% of the clothes consumed in the U.S. were manufactured domestically; today it is less than 2%, according to an individual interviewed in the segment.

Oliver then adroitly put his finger on the role of supply chain visibility (or lack thereof) in driving company behavior and practices, and in doing so made the case for multi-tier or sub-tier supply chain visibility.

“One of the biggest problems in holding many brands accountable is that deniability seems to have been stitched into the supply chain.” He then explained a scenario in which Walmart sent an order to an approved apparel factory that sent it to an unapproved (subcontractor) factory without Walmart’s knowledge. He proceeded to chide Walmart for portraying it as just a “crazy, one in a million, random accident that only happened a few times in the last few years.”

“This is not the last time that Walmart has been caught unaware,” he continued. "And they are losing the right to act surprised. They’re like the characters in the Hangover movies. It’s not an accident the third time, boys. It’s a pattern of reckless behavior that has to be addressed."

In an attempt for greater transparency, Oliver recommended that some companies change their names. He suggested, for example, that American Eagle change its name to “Bangladeshi Swamp Hen.” He was OK with Banana Republic, however.

There are a lot of good reasons to invest in supply chain visibility as part of your supply chain risk management and corporate social responsibility (CSR) strategy. John Oliver, by his own admission, is not pointing out anything new. In fact one of his main points was that CSR, vis-a-vis the supply chain, is an old issue and we should have made more progress by now. He was just using his platform to keep the pressure on. Well done John Oliver. There are now two TV shows you definitely don’t want your company to be featured on: 60 Minutes and Last Week Tonight.

Looking to get ahead of this issue? Here's a good place to start:

8 Ways to Scope Supply Chain Risk Management Programs

April 13, 2015 Posted by Supply Chain Event Monitoring, Supply Chain Resiliency, Supply Chain Risk Management, Supply Chain Visibility 0 thoughts on “8 Ways to Scope Supply Chain Risk Management Programs”

Author: Wayne Caccamo

supply_chain_risk_management_program_scope-2

INTRODUCTION

In the Ultimate Guide to Supply Chain Resiliency Program Success, I identify several dimensions which can be used to determine and describe the appropriate for a supply chain risk management program (SCRP). All are discussed in the broader context of building a complete business case for a supply chain resiliency program. Here is an excerpt from the guide. It is important to describe the boundaries of the program (what is and is not part of the program) from a variety of angles. This will bring clarity to the processes of communicating and setting expectations related to business goals and results. Depending on a number of factors including the organization’s business strategy, culture, and unique risk profile, one, or more typically, a combination of dimensions described below should be used to delineate your program’s scope.

 

Risk type identification approach

An SCRP may be defined around a selection of target risks that need to be managed. One of the many published supply chain list catalogs or supply chain risk taxonomies can be used as a starting point. ChainLink Research, for example, provides a taxonomy which breaks risks into 5 major categories: financial/market, operational, geographic, corporate social responsibility, and regulatory economic [See “Supply Chain Risk Solutions: A Market Overview,” 2013]. A risk type driven program minimally identifies a set of relevant and vetted risks based on strategic/executive-level concerns, experience and consequences with previous supply chain disrup or eventstions

Supply & demand chain approach

An SCRP can encompass some or all phases in a supply & demand chain from upstream process such as product design and development, to sourcing and manufacturing, to downstream delivery logistics and customer support. This life cycle is described as Source-Make-Deliver-Return (SCOR Model) and there is a unique set of risks that can be mapped to each of these phases. Many organizations take this approach and start with a program scope that focuses primarily on the “source risks” and within that phase focus only on upstream Tier 1 suppliers, at least initially, before expanding the scope end-to-end. Within Tier 1 organizations, the scope may be further narrowed to focus on a specific segment or number of named “highest risk” suppliers.

Internal versus external risk approach

An SCRP can focus on internal risks to supply chain (e.g., supply quality, supplier reliability, production/equipment reliability, demand forecasting) and external risks such as natural disasters, geo-political events, labor strikes and factory fires.

Risks to tangible versus intangible assets approach

An SCRP program can focus primarily on managing risks to tangible assets such as human, physical or financial resources. Alternatively, the focus may be more on intangible resources such as brand, reputation, IP or competitive positioning.

Solution/Tool-driven approach

While technology decisions should normally conform to people and process needs rather than the reverse, some organizations will adapt a technology platform and its inherent risk management focus which, for all intents and purposes, defines the program scope. They then configure the solution to the extent possible and extend the platform working with the vendor as a strategic partner to influence the product roadmap.

In an emerging early-stage and fragmented market for solutions, this approach can make a lot of sense. By definition it ensures that there are tools that align with your in-scope program processes, rather than risking having to cobble together a set of point solutions. Also, the emerging vendors are eager to work closely with large enterprises to validate their solution and build reference accounts.

  • Supply Chain Initiative-Driven Approach. This approach focuses on pursuing various supplier information base initiatives that are either directly or indirectly associated with supply chain risks. These include disruption risk, business continuity/recovery risk, capacity risk, compliance risk (e.g. conflict minerals), corporate social responsibility (brand risk) and security risk.  To the extent that solution/tool vendors take the approach of building solution modules for each supply chain initiative, this approach may be virtually synonymous with the solution/tool vendor approach described above.
  • Supply Risk Management Approach.  An SCRP may focus on (1) proactive risk management (efforts to decrease the likelihood and consequences of a supply chain risk event), (2) incident management (efforts to minimize the negative consequences of an event after it has occurred) and/or (3) risk avoidance/elimination/transfer management. Increasing second sourcing is an example of how risk can be reduced or eliminated. Increasing inventory is a tactic for mitigating supply risk, while insurance can be used to transfer risk to a third party.
  • Other Approaches. Other potential scope dimensions include “supply chain versus services chain” This guide focuses on supply chains, but its worthwhile understanding what processes, practices, concepts and ideas can be applied or cross-pollinated with service chain resiliency efforts.
    in disruptions or incidents, and/or high-level analysis of future vulnerabilities.

CONCLUSION

The right answer typically blends elements of more than one approach. For example, a typical SCRP scope may start with a focus on select supply chain initiatives supported by a strategic technology or consulting services provider. The first phase may further focus only on select risk categories for tier 1 suppliers and then expand the types of risks and the number of supply chain tiers under management.

When taking the Supply Chain Initiative-driven Approach, core (disruption) risk management should always be complemented with business continuity planning (BCP) and capacity management solutions in order to provide a more complete resilience program. For example, business continuity measures should be in place to minimize supplier recovery time in the event of a disruption. Proactive collaboration with suppliers may be invoked in the event that a supplier has constrained capacity in a short-to-medium term planning window.

Overcoming Objections to Investing in Supply Chain Risk Management

April 2, 2015 Posted by Supply Chain Risk Management 0 thoughts on “Overcoming Objections to Investing in Supply Chain Risk Management”

Author: Wayne Caccamo

INTRODUCTION

supply chain risk management business caseIn the Ultimate Guide to Supply Chain Resiliency Program Success, we identify six typical objections to supporting investments in supply chain risk management programs and share specific remedies. Areas of resistance tend to be related to professional incentives, psychology, misperceptions about costs, and a lack of awareness and education. Understanding the role that each of these factors may play and being prepared to neutralize the resulting objections is key to making your supply chain risk management business case. In this post, 5 objection categories are shared; our next post will address the sixth and final objection category.


1.  Incentives and human nature

At the core of the incentive issue is that few executives are compensated or incentivized in their day-to-day job to rigorously manage risks. What has been described as risk apathy is driven by supply chain executives who often find themselves at the center of the daily storm, striving to balance very demanding operational objectives while satisfying customers, cutting costs, and helping grow revenue. They must deliver results today while working on capabilities that will make companies competitive in the future. From a psychology perspective, it is easier to focus on the burning short-term issues that are here and now than worry about the next black swan event. As a result, it is easier to put off investments in risk management.

2. Dependence on supplier collaboration

A typical objection to investing in a supply chain resilience program is the dependence on supplier transparency and collaboration. Many organizations see resilience programs (especially those whose value proposition depends on n-tier supplier visibility) as a non-starter since historically suppliers have been reticent to share information that they fear may be used against them, for example, in financial negotiations. A lack of data standards and varying supplier IT maturity levels can further hinder an effective data exchange.

3. Perceived cost of visibility

Another common point of resistance is cost, especially the perceived cost to achieve end-to-end supply chain visibility. It can seem daunting to ponder the cost of supporting an internal team to reach out to potentially thousands of suppliers and collect and maintain data at the necessary level of granularity, integrity, and accuracy over an unbounded period of time.

4. Conflicting objectives

Many supply chain resiliency tools and remedies seem at odds with popular supply chain cost efficiency strategies such as lean inventory management and other measures to reduce cost while remaining innovative. As a result, various stakeholders may hesitate to get behind a program they view as increasing costs by supporting measures such as building buffer inventory and engaging alternate/ redundant suppliers. Moreover, the relentless focus on cost reduction as a pervasive business objective and metric causes the need to focus on risk-reducing objectives – such as quality, on-time delivery, responsiveness, diversity, and supplier viability – to be overlooked.

5. Difficulty in valuing risk management

A companies’ inability to calculate and collectively agree on how to value risk due to a supply chain disruption can obstruct making progress in risk management efforts.


RECOMMENDATIONS

Here are some suggested supply chain risk management program critical success factors and supply chain risk management best practices for overcoming these objections:

  • Educate leadership on how supply chain risk management programs align with strategic objectives and how a failure to act can derail the achievement of strategic goals.
  • Provide empirical evidence of the probability of a significant supply chain disruption event and the short and long-term business and financial consequences.
  • Speak the language of business value and prepare an ROI analysis.
  • Provide a dispassionate analysis of alternative solutions or taking a “do nothing” approach to the supply chain resilience and risk management challenges and the consequences of not pursuing resiliency investments.
  • Develop and communicate strategies and plans to mitigate the risk of suppliers not collaborating in the development of your multi-enterprise resiliency program. (Stay tuned for an upcoming Blog post which expands on this topic or download the Ultimate Guide now).
  • Address “conflicting objectives” head on by educating stakeholders on the need to balance what Cisco characterizes as the “resiliency challenge” – balancing speed and flexibility, and how to be innovative while being resilient.
  • Converge on a risk value standard that is based on revenue impact and avoid arguments about the probability of disastrous events occurring or how to value things like brand impact. Provide best- and worst-case revenue impact scenario and mitigation cost estimates that can be compared against established risk tolerances so that decisions can be made using a consistent process.

Supply Chain Mapping Forms the Foundation for a Robust SCRM Program

January 30, 2015 Posted by Supply Chain Resiliency Management, Supply Chain Visibility 0 thoughts on “Supply Chain Mapping Forms the Foundation for a Robust SCRM Program”

Author: Bindiya Vakil

Supply Chain Mapping is a Critical Part to a SCRM StrategyAlmost every article about supply chain risk management begins with the complexity and global reach of today’s supply chains.  Over the last fifteen years, companies have made some very critical supply chain enhancements – sourcing from low cost countries, outsourcing manufacturing to sub-contractors across the globe, and going lean.  I characterize these enhancements as Supply Chain 2.0.

The outcome of Supply Chain 2.0 is that in effect, we have stretched our supply chain and left very little room to absorb even minor blips and disruptions.  We have very limited, or no information about a vast majority of our suppliers.  At the same time, this global reach has created many additional areas where the supply chain is exposed to disruptions.  Port delays, transportation delays, increased material handling and product damage, long inflexible transit times, local business environment and infrastructural dependencies etc.  Most companies are unaware which global regions they have exposures to until a supplier calls to extend lead time for a critical component.

Often after a supplier calls, the company scrambles to find out which other suppliers might be in the impacted zone and what other parts or products might be disrupted.  And when there are hundreds of suppliers, where do you start?

We have found in working with our clients that raw material or component disruptions are the most frequently occurring events that disrupt their supply chain.  Some are rooted in catastrophic events but often the problems build up over a period of time.  For example, Chinese New Year comes around every year.  Yet, without adequate knowledge about which suppliers are located in China, customers have no way to determine which suppliers they should proactively work with to build ahead.

Dependence on scarce raw materials, capacity utilization trends and products dependency mapping is another area where proactive management is essential.  For example, the Apple Watch has experienced launch delays because of the failures of a critical supplier, one of Apple's main sources of scratch-resistent sapphire goods.

Over 80% of enterprises suffered at least one supply chain disruption this past year (BCI/Zurich, "Supply Chain Resilience 2014")!  This alarming statistic proves that we have arrived at the point where strategic investment in resiliency is no longer optional.

51% of disruptions originated below their tier one suppliers. And 74% of companies do not even have full visibility into their supply chains. This remains increasingly important as 24 cases of unique supply chain events or disruptions can occur somewhere in the world each month. That is, roughly one every day.

The next generation of supply chain innovation will be driven on the resiliency front, what we like to characterize as Supply Chain 3.0.  This is the resiliency-optimized supply chain.  And we believe that the very foundation of the new paradigm is supply chain mapping.

Supply chain mapping to identify origin and path of components as a capability is no longer simply a nice thing to have.  A robust mapping platform provides a foundation for a rich set of analytics that can help large corporations with extensive and complex supply chains to make quicker decisions, proactively identify vulnerabilities, quantify exposures and take evasive action.

Supply chain mapping also drives capabilities beyond just risk management.  Country of origin, localization, carbon footprint analytics, currency risk and pricing trends, fuel price impact analytics – these are just some examples of capabilities that would be enabled.  In short, this is an investment that pays off many times over.


You can read more by Bindiya Vakil, CEO and Founder of Resilinc, here on her series on supply chain resiliency management.

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