There are a few things supply chain professionals dread. Like, that urgent call from a distributor about longer lead times for a critical part or talk that a third-tier supplier is filing bankruptcy or having to scramble for alternative sources of supply when a flood wipes out an important supplier factory.
It’s hard enough managing supply chain complexity on a good day. Add the ominous task of mitigating supplier capacity risks, and you could have a full-on nervous-making scene on your hands.
But, it deserves your attention. As Resilinc’s CEO Bindiya Vakil recently blogged, no company is immune to this risk. Companies the world over–and even of the likes of supply chain wonderhouses such as Apple Inc.–have been victims of supplier capacity shortfalls and part delivery interruptions at one time or another.
Additionally, a supply and demand mismatch in the aftermath of the Great Recession is causing headaches as well. Despite a pick up in demand, manufacturing capacity, which was cut in many sectors during the economic downslide, has not ramped up sufficiently. Many supply chain partners are either taking a wait-and-see approach to adding more capacity or have to contend with labor, regulatory or capital constraints. And, that’s adding significant pressure to the source, buy and make converations supply chain professionals are having today with suppliers.
Mapping Supply Chain Risks
While eliminating supplier capacity risks altogether throughout the entire end-to-end supply chain could be hard, if not impossible, there are ways to curtail their impact when then occur.
One key way is to define and measure supplier capacity risks. Having a tool or service that identifies supplier vulernabilities and proactively provides supply chain visibility to supplier practices and processes could give companies insights into existing and potential risks and lessen the impact of a disruption, Resilinc’s CTO and Co-founder Sumit Vakil pointed out in a recent webcast with Supply & Demand Chain Executive.
Additionally, companies that can identify challenges and expected benefits from developing and implementing a supplier capacity management solution will fare better than competitors in the wake of a disaster or crisis situation. Capacity management planning, for instance, helps companies address extreme product demand upswings, recover quicker when there is a supply chain disruption and optimize the market window for short-lifecycle products.
Another important step is to integrate supplier capacity management into their supply chain risk management strategy since they are so closely related. Companies that have a centralized repository of supply chain data, map multiple tiers of suppliers and have sense-and-respond capabilities will be able to assess capacity issues quicker, lower risks associated with those issues and ensure business and supply continuity.
By taking a few of these measures, you can start turning a menace into meaningful risk mitigation plan.
Has supplier capacity risk management got you thinking about what-if sourcing and supply chain planning scenarios? Not sure where to start?
Resilinc’s CTO and Co-founder Sumit Vakil will offer tips for creating an intelligence-driven, proactive approach to long-term supply assurance at this month’s Global Supply Chain Resiliency Council session.
What was your immediate reaction the last time you came across a news headline about unsafe working conditions or incidents of forced labor?
Did you question the companies involved and who should be held accountable for employee safety, even if they were a tier 3 supplier? Perhaps you wondered if the companies have an outlined Corporate Social Responsibility (CSR) program in place? And if so, was it implemented as effectively as possible?
Such questions are important to consider as CSR—while not a new concept for businesses—continues to gain increased adoption, and encompass the suppliers in their supply chain.
According to the Global Reporting Initiative (GRI), the number of U.S. companies that published CSR reports increased from 70 companies in 2007 to more than 540 companies in 2012.1 Additionally, more stakeholders and shareholders are paying closer attention to their relative company’s CSR actions and results. For example, during the 2013 proxy season (January 1-June 30, 2013), the number of Environmental and Social (E&S) resolutions filed by shareholders with U.S. companies rose to 395 filed (compared to 368 in 2012), according to the Institutional Shareholder Services Inc. (ISS).2
As more businesses’ continue to report on their CSR programs, companies will need to utilize the right solutions to integrate their suppliers into their CSR program and to better understand how such factors as supplier location, compliance efforts, consumer demand, and industry growth factor into their business models and CSR initiatives.
Supplier locations do matter
Many elements go into selecting the right supplier for a business, from the supplier’s purchasing habits, lead times, product quality and cost, and consistency, to name a few.
Equally important is the region or country a supplier is located in. Issues of human rights violations and forced labor continue to exist and receive increasing global awareness. As such, businesses may want to reconsider areas with high reports of human trafficking because of the ramifications on their multi-tier suppliers and overall company. They may also consider such realities in their CSR program, as extreme a situation as human trafficking may be when compared to other areas their CSR initiative may account for. Such CSR program areas can include ensuring that products are produced ethically, e.g., include fair employee pay, safe working conditions, and legal working hours.
And according to the U.S. State Department’s 2015 Trafficking in Persons Report (TIP), even countries that fall into Tier 1, classified as “governments of countries that fully comply with The Victims of Trafficking and Violence Protection Act’s minimum standards for the elimination of trafficking,” are not necessarily exempt from the issues of human trafficking.3 Countries must continue to address the issues of human trafficking and fair labor to ensure complete transparency of the matter. Those that don’t may, in some cases, face certain consequences. Thailand, for example, was listed in Tier 3 of the U.S. State Department’s TIP report. The placement comes despite the country’s recent efforts to crackdown on human trafficking camps in Thailand reported back in May 2015.4 (Note: countries listed in Tier 3 placement of the TIP report are categorized as having “governments that do not fully comply with the TVPA’s minimum standards and are not making significant efforts to do so.”)
Compliance efforts underway
Businesses alike must also increase supply chain visibility to identify risks and labor issues based on geographic locations. In fact, governments and federal regulations are increasingly tracking whether businesses are taking the right measures to prevent such issues as human trafficking in their supply chains.
The International Labour Organization (ILO), United Nations (UN), the North Atlantic Treaty Organization (NATO), and the Organization for Security and Co-Operation in Europe (OSCE) all continue to fight against human trafficking and related issues affecting global supply chains. Organizations such as the Sustainable Accounting Standards Board (SASB) also made great strides since 2012 to address the issue of sustainable disclosures in company’s annual SEC filings. However, lawmakers are taking such steps even further, following the U.S. State Department’s published TIPS report.
Reps. Carolyn B. Maloney (NY-12) and Chris Smith (NJ-04) introduced the Business Supply Chain Transparency on Trafficking and Slavery Act of 2015.5 The bill would require public companies with over $100 million in global gross receipts to publicly disclose any measures to prevent human trafficking, slavery, and child labor in their supply chains as part of their annual reports to the Securities and Exchange Commission (SEC).
Existent regulations, such as the California “Transparency in Supply Chains Act” (SB 6571) of 2012, requires retail companies (those which have annual revenue of $100 million or more and annual California sales above $500,000) to disclose their efforts to eliminate slavery and human trafficking from their supply chains.6
Consumers affect CSR and industry growth
Increasing consumer demand is another indicator which continues to heighten the need for complete supply chain visibility. More and more product consumers consider not only the quality of a product, but its company, where the product came from, who made it, and how it was made.
In fact, 55 percent of global consumers are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact, according to a study by Nielsen.7 And 67 percent of survey respondents prefer to work for a socially responsible company. Of those global respondents, half are millennials (born between 1980 and 2000).
As millennials ask for more sustainable actions from companies in their CSR programs, their influence also extends to other areas. Social media, evolving mobile technology, and digital innovation all resulted from the needs and patterns of the millennial generation. The impact and purchasing power that the growing millennial population—projected at 81.1 million in 20368—may have on specific industries also has much relation to a company’s CSR program.
The electronics industry, for example, is expected to reach $286 billion in revenue this year, according to the Consumer Electronics Association.9 Wearables, such as health and fitness devices, smart watches, and smart eyewear are all technologies that will add to the industry’s growth. And with such development, businesses may have an even bigger responsibility to ensure ethical practices and measures are taken in their supply chains.
Organizations such as the Electronics Industry Citizenship Coalition (EICC) continue to make headway in addressing risks and greater supply chain visibility for electronic OEMs. New rules added this past April to its EICC Code of Conduct further address issues of forced labor.10
What you can do
There are numerous ways businesses can take proactive steps to learn about issues affecting their supply chains and how they should be addressed in their CSR programs, protect against brand risk, and increase their visibility past Tier 1 of their supply chain.
Be cognizant of local and government regulations affecting countries that are home to certain aspects of your supply chain. Before working with global suppliers or manufacturers, understand which countries are classified as Tier 1, Tier 2, Tier 2 Watchlist, or Tier 3 of the U.S. Department of State’s annual TIPS report, as mandated by TVPA. Know what efforts your state or local communities are making and what regulations are already effective that require you to take greater accountability for your supply chain.
Leverage available supply chain risk prevention (SCM) resources. Identifying your company’s CSR program is a crucial step to addressing ethical issues that affect your global supply chain. For those ready to take the next step, using integrative mapping platforms can enable businesses to generate immediate score cards at both company and site level, or identify which supplier sites do/do not comply with local regulations.
Build deeper supplier relationships. Work with your suppliers to create a sense of trust. Understand their core business, capabilities, and pain points that may prevent your supply chain from operating efficiently. Share relevant information they need to know, such as supplier business continuity plans, to enable them with best practices. This can ensure you receive the result you need and that your CSR program needs are met.
Find out how the Resilinc CSR module can help you protect your brand with end-to-end supply chain partner visibility. Learn more about our product or download a copy of our Supplier CSR Data Sheet and learn how you can gain data that can improve your supply chain visibility.
There are many moments that rattle a company’s core. Something like the 9/11 terrorists attacks in the U.S., a tsunami in Asia, a volcano eruption in Europe, sourcing conflict minerals from African mines or a global recession could severely hurt supply chain operations, revenue and branding reputation for many quarters.
In the aftermath, assurances that a proposed action plan would hold up to the force of the blow fade. Executives learn that critical parts will be in short supply, inventory buffers dwindle and manufacturing lines are idled. Getting back to normal will be a few months away, if you’re lucky.
This is usually, too, when people turn conversations back onto the importance of business continuity planning and set out with a “never again” missive to avoid future disruptions.
The initial knee-jerk reaction to a disruption, however, doesn’t often go far enough. While business continuity plans are essential, they are not what most people think they are–they are not simply instruction manuals about how to respond when something goes wrong. They are important indicators for identifying supply chain, operations and financial weaknesses, risks and gaps.
As you work through your business continuity planning process and lay out a risk management strategy designed to keep your supply chain resilience in the wake of disruption, keep these tips in mind:
Push for proof. Be the executive that asks the hard questions about supply chain gaps and where trouble spots lie within the supply chain. Proactively stay on top of what’s happening beyond your first-tier supplier base. Push to ensure different visibility and risk management models are developed to keep businesses moving through a disruption with as little damage as possible.
Assign responsibility. Pass up the urge to assume someone else in the organization or supply chain will be aware of a possible risk and know exactly how to respond when a crisis hits. Just because visibility is a supply chain mantra today doesn’t mean everyone is looking through a clean lens or seeing the whole picture. Define roles and responsibilities about how risk is assessed, monitored and flagged and spell out who does what at certain points in the process.
Take a three-fold approach to monitor, plan and protect. Go beyond preparing for a disaster. Start with the idea that a disruption is likely to happen and know how disruption could affect sourcing of both high-cost and low-cost parts necessary for your product’s production. Map multiple tiers of suppliers and their sites. Track events as they happen, and cushion the supply chain with a mitigation strategy aimed at safeguarded revenue and profit over the long term.
All sorts of events can shake up the supply chain, pretty much at any time. A business continuity plan gives companies steady ground to stand on while they use their resiliency to swerve around obstacles being thrown in their direction.
What kinds of supply chain resiliency elements are you building into your business continuity plans?
Looking for additional insight about how to build resiliency into your supply chain? Click here to learn more about what other companies are doing.
The current Ebola outbreak is becoming more than just a worldwide emergency health issue. It is becoming a supply chain concern. While our thoughts are with those impacted by the awful disease, the potential supply chain risk is also creeping into the minds of business leaders.
Resilinc’s monitoring shows some signs of a ripple effect on supply chain sourcing, pricing and availability of key raw materials. These events, indicated by an increasing number of news reports, raise flags about the impact the disease has on mining activities (particularly with alumina, iron ore and gold), palm oil and palm kernel oil supplies, and potential crude oil disruptions.
Protecting Your Supply Chain
To avoid possible supply chain disruptions, companies can take a few steps now to secure their supply chains and mitigate risks associated with the contagion.
Here are Resilinc’s recommendations:
Improve communication with partners. Actively engage suppliers in information-sharing notifications and, when possible, stay flexible when making sourcing, procurement and logistics decisions.
Map and identify tier-one and sub-tier suppliers operating in and nearby countries affected by Ebola. Resilinc subscribers can use the “What if” tab in your dashboard for instant supply chain analytics. However, if you do not subscribe to Resilinc’s service, here’s some guidance:
Locate where your raw materials are sourced and how these materials move across multiple tiers of suppliers globally
Analyze where and how key suppliers are likely to be impacted
Determine which products are at risk for a disruption and calculate the potential negative effect on your revenue and profits
Analyze current inventory levels for critical components, commodities and raw minerals. Understand which raw materials could most likely affect your production and delivery targets. Resilinc’s supply chain analysis, for example, shows that one of the largest exports from Liberia, a country hard hit by the Ebola outbreak, is palm oil and palm kernel oil, a key building block in many raw materials. Luckily, 80 to 90 percent of these global supplies come from Malaysia and Indonesia, therefore the impact should be minimal. While global pricing is stable at this point, Resilinc is closely monitoring the situation. Below are materials that are downstream of palm oil and palm kernel oil.
Ascorbyl palmitate (antioxidant)
Calcium stearate (tablet mold release agent and lubricant)
Caprylic acid (treatment for some fungal and bacterial infections; surfactant, and cleaning agent)
Cetyl palmitate (emollient ingredient)
Isopropyl myristate (solvent for topical therapeutics)
Sodium dodecyl sulfate (also known as SDS; surfactant)
Magnesium stearate (tablet mold release agent and lubricant)
Myristic acid (solvent for therapeutics)
Palmitic acid (palmitoylation of proteins)
Polysorbate 20 (surfactant and emulsifier)
Polysorbate 80 (surfactant and emulsifier)
Sodium caprylate (treatment for some fungal infections; surfactant, and cleaning agent)
Sodium stearate (tablet mold release agent and lubricant)
Vitamin A palmitate (antioxidant)
Vitamin C ester (antioxidant)
In the midst of a crisis, knowledge brings peace of mind. Some manufacturers will spend hours and weeks monitoring and analyzing the potential impact Ebola could have on their supply chain. With Resilinc’s pro-active supply chain mapping and monitoring, attaining that peace is just a click away.
Sign up for Resilinc’s EventWatch, our supply chain monitoring solution, and start organizing a faster, more efficient response to situations beyond your control.
On Aug. 24 at 3:20 a.m. Pacific Time, a 6.0 magnitude earthquake shook Northern California, injuring many people, damaging buildings and knocking out power and water services around Napa.
Though the Bay Area region is prone to this kind of natural phenomenon, it’s been a while since locals felt something this significant. The last major earthquake in the Bay Area was the 6.9 Loma Prieta earthquake in 1989. Luckily, too, in comparison to other past tremors, the Napa earthquake was moderate.
But, still, it was an event that could have quickly turned in a wide-scale disruption. More importantly, it reveals how vulnerable supply chains are when Mother Nature is involved and how quickly you have to spring into action to get the situation under control. It is the perfect example of a supply chain resiliency case study.
For those of you who assess risk on a regular basis, you understand how critical it is to stop everything you’re doing when an event happens. In this case, literally taking the “wake-up” call, where you may have got out of bed immediately to analyze the situation and potential impact. That’s what happened as soon as our team felt the shake–our event monitoring team began scanning the newsfeeds, assessing the situation, alerting clients about what was happening and individually notifying our EventWatch subscribers of the potential impact to facilities in their supply chain. We did all this within 90 minutes of the earthquake’s occurrence.
We knew this would be vital information for many of our customers doing business in the region. Also, because the earthquake happened in the early morning hours on a Sunday, we knew risk mitigation executives would have to be ready to report to senior management and get the action plan moving by 8 a.m. Monday morning.
Since we were already at work gathering information and looking at the scope and scale of damage in the aftermath, Resilinc subscribers got a break. They got to sleep in because our 24x7 event monitoring services were doing the work for them. So while our subscribers may have woken up to a potentially disruptive situation, they did not have to spend their Sunday working on collecting the information or running the initial event analysis. They could take our alerts and start mapping out what-if scenarios, think about alternate sourcing plans and get their head around long-term risk-avoidance issues.
You Never Know When Disaster Will Strike. But, You Can Keep Your Supply Chain Moving When it Does
In 2011, the world witnessed how the earthquake in Japan and resulting tsunami had devastating effects to communities and global supply chains in electronics, automotive and life science industries. In contrast, the recent Napa earthquake was comparatively mild, but it occurred along a fault thought to be inactive. Some scientists are concerned that the release of stress by this fault could have increased the stress on the Hayward Fault, a major fault that runs east of the San Francisco Bay from San Jose to San Rafael. This area is densely populated with people and companies, and an earthquake in that area could have critical and direct impact on the automotive, electronics and life science supply chains (See map).
Although Resilinc has assessed the North Bay earthquake as having a small impact on the supply chain, an event 60 miles south in San Jose could impact as many as 140 sites. Should an event occur here or anywhere, for that matter, Resilinc’s services reduce the analysis time for our customers by instantly providing notification of the sites potentially impacted as well as the part numbers. This gives our customers a head start on procuring material to keep their production online, and before supplies become scarce and prices increase.
The early morning North Bay earthquake was another reminder for the industry that things could change overnight. For some people, the news meant long hours trying to make sense of what was happening where and scrambling to stay up to date. Others, though, relied on our mapping and constant monitoring services, and got to spend their time mitigating the weekend rather than risk.
How Resilient is Your Company's Supply Chain Risk Management Strategy?
Different businesses achieve varying levels of maturity in their practice of supply chain resiliency management. At one end of the spectrum, well defined resiliency considerations are explicitly incorporated into processes and tools--indicating a high level of maturity.
At the other end, risk is weighed implicitly as different people across the company apply their personal risk tolerances. Most companies fall somewhere in the middle of these two extremes. The first objective is to understand where the organization falls along this spectrum. So, you may ask: how resilient is my company's supply chain risk management strategy, and where do I start? Building a supply chain risk management program can be accomplished via a resiliency assessment effort.
Resiliency Blind Spots
A resiliency assessment exercise begins with determining what type of risk related data is maintained and periodically tracked throughout the organization. This helps to distinguish the known versus the unknowns and identify resiliency “blind spots” from an information and intelligence perspective. Some companies track financial resiliency of suppliers who are public companies since this data is available through Moody’s, D&B or other sources. Some operational teams run metrics to determine on time delivery performance of their suppliers and others supplement this with intelligence about suppliers’ flexibility, strength of their contracts, quality performance of their components, etc. Mapping what is known helps to pinpoints areas where information needs to be collected.
Spend Based: Most companies use the 80-20 rule for supplier management – they actively manage the 20% suppliers who have 80% of the overall spend. While efficient from a spend management standpoint, this practice leaves resiliency gaps. For a product to be shipped, every single part has to be available. Some years back, a German automaker had a disruption at their cup holder supplier. This rendered expensive US bound luxury cars un-shippable... Thus, from a resiliency standpoint, each part is needed. This is not to advocate establishing deep supplier relationships with all the partners as this is commercially unfeasible. Many blind spots can be eliminated by tracking key pieces of information collected from all suppliers.
Location Based: Most companies lack supply chain visibility into their suppliers’ manufacturing footprint. With more suppliers manufacturing components in lower cost countries, it is important to understand the locational risks that are inherent in different geographies, be it local or macro level. With greater prevalence of outsourced manufacturing, a sub-contractor dependency can develop. In the high tech industry, Taiwan-based TSMC or UMC are examples of this. Many fabless semiconductor companies use these highly sophisticated wafer fab companies and create an indirect and sometimes unknown dependency. In some cases, dual sourced parts can be traced back as originating from the same sub-contractor. Lack of information creates difficulties in applying an appropriate mitigation strategy to attain desired thresholds. For example, an auto maker might decide to hold high levels of inventories for inexpensive components using lead times as a gauge. However, lead times can be artificially low. In the absence of visibility to where they originate, the right inventory level can only be guessed. Likewise, if an alternate source uses the same sub-contractor to make the part, then second sourcing is not necessarily the right strategy to cover location based risks. An initial resiliency assessment should expose these unknowns for the company to decide whether to fix the blind spot.
Impact Analytics: Other information is more intrinsic - since supply chain organizations are primarily cost centric, most of the prevalent analytics is related to spend. Robust revenue impact analytics which can pinpoint critical components, nodes or suppliers is not always available. However, this type of analysis can really help identify top business priorities where mitigation efforts should be focused.
Focused Risk Mitigation for Maximum Impact
Combining intrinsic impact analyses with supplier resiliency intelligence can highlight the biggest vulnerabilities and highest risks. Armed with this type of intelligence then, a risk manager can clearly articulate where the bulk of efforts should be focused in the short run and how to effectively spend risk mitigation dollars. They can also decide on the mitigation strategies that will address most of the biggest risks.
A robust resiliency assessment effort identifies blind spots, generates revenue impact analytics and helps identify critical areas. It really helps to set a foundation for supply chain resilience where the right set of information is defined that can drive resilient decisions. It paves the way to define risk tolerance levels and choose appropriate mitigation strategies that will address the right set of risks. Most of all, it helps companies to focus efforts and money for maximum impact.
Bindiya Vakil is CEO and founder of Resilinc and is a recognized thought leader in the area of supply chain risk management. She has been a practitioner in high-tech supply chain management with companies including Flextronics, Cisco and Broadcom. Ms. Vakil has a master’s degree in supply chain management from MIT and an MBA in Finance. She is a published author and frequent speaker at top supply chain conferences and universities on the topic of supply chain resiliency. Ms. Vakil’s concept of “Design for Resiliency” is being widely adopted as a best practice in the industry.
Click here to read more in her ongoing blog post series.
For many companies, building a supply chain risk management program is stymied by the lack of a unifying framework, methodology and toolkit. I will outline what characterizes a world class program and how to go about making supply chain resiliency a reality for your organization.
The five basic tenets for a successful resiliency management program are as follows:
Executive sponsorship, top down focus and funding for resiliency management
Metrics tied to rewards to ensure adequate focus and resource commitment
Embed resiliency into the organization's culture using an analytics + tool + process approach
Focus on resilient product design through "risk optimized" component, supplier and manufacturing choices
Robust crisis preparedness efforts to ensure "first on the scene" and coordinated response
This is the end vision where policies, tools, processes, people, analytics and metrics are all in alignment. This is a multi-year ongoing commitment to resiliency management. The idea is that information and intelligence is available in the right forums to the right people to make resiliency-optimized choices. For example, supplier resiliency scores are available to product design teams choosing suppliers on a new product. Component revenue impact and resiliency score is available to a test team deciding between testing a second source vs. a new product. Metrics and Tools Analytics and metrics help to quantify resiliency and measure progress. Simple analytics that bring different streams of resiliency data together into a single actionable scorecard can facilitate comparison. These metrics can be made meaningful by associating progress with rewards and compensation. Tools to manage these metrics can facilitate accuracy, uniformity and ease of use. In order to operationalize resiliency, people have to adopt metrics. If manual effort is needed to gather data and calculate scores, this is sure to lose interest. Tools that bring together important dimensions of resiliency, cost, etc. are viewed positively and have a better shot at adoption. Processes and Controls Embedding these metrics into processes ensures that the discipline of weighing resiliency considerations is followed. Exception processes should be put in place for certain key elements. For example, a product design engineer wishing to design in a financially weak supplier into a new product would have to get approval from a superior – this creates oversight and ensures that different considerations are properly weighed. This also sets the stage for informed risk mitigation if the decision is to go forward with the weak supplier due to cost or technology considerations. Contract language, higher inventory levels, capacity options or second sourcing efforts can be implemented right away to mitigate the risk of a future bankruptcy. Executive sponsorship and GoalsResiliency thinking starts at the top - executive alignment and buy in is crucial. Goal setting should account for resiliency constraints. For example, a company with manufacturing in China should carefully set inventory turns targets. Strategic inventory buffers which protect against unforeseen events and demand supply mismatch should not be dismantled to meet turns targets. This is possible with executive sponsorship for resiliency. Additionally, a top down focus ensures that there is uniformity in how the organization implements resiliency so that a cost driven business unit does not always outperform a resiliency driven business unit on short term deliverables. Funding is critical for appropriate tools to be adopted, mitigation strategies implemented and recovery efforts tested. “First on the scene” with Crisis Management Excellence With all these efforts in place, however, the perfect storm will form eventually. Therefore, it is important to simultaneously have real time intelligence to monitor global events and anticipate possible impact as quickly as possible. The company that is “first on the scene” has valuable early mover advantage in securing available capacity and supply. Best in class crisis preparation exercises involve identifying and training people about “who does what”, “who says what” internally and externally with customers and the media. The streamlined flow of information between the supplier and customer minimizes chaos, reduces misinformation and allows faster decision making. Clearly defined and tested engagement models help to ensure that the supplier knows how to communicate effectively with all the right people at the customer. As I have shown, a world class resiliency program comprises a robust proactive and reactive engine that helps avoid disruptions, and mount a coordinated response if a disruption does occur. Having established a clear picture of the end state, we now can begin to outline the first steps to get started on this path. My next few blog posts will be about the foundational activities that can build a strong information centric environment for resiliency.
This is the second post from Bindiya Vakil, Resilinc's CEO and Founder. She is a recognized thought leader in the area of supply chain risk management, and has been a practitioner in high tech supply chain management with companies including Flextronics, Cisco, and Broadcom. She holds a master's degree in supply chain management from MIT and an MBA in finance. Ms. Vakil's concept of "Design for Resiliency" is being widely adopted as a best practice in the industry. She was named a Top Female Supply Chain Executive in 2013 by Supply and Demand Chain Executive.
You can read her first blog post here, as well as listen to her speak in our upcoming webcast on conflict minerals compliance this Thursday, July 24th, 2014, at 2:00 PM ET.
As the world economy improves and end-customer spending picks up, companies will encounter a supply chain risk they may not have experienced in some time: ensuring that suppliers are ready to meet higher demand.
The cyclic transition from running lean to ramping up always involves some rough patches. And, while veteran supply chain professionals may have lived through their share of ups and downs, handling this phase of growth doesn’t seem to get easier.
Therein lies the potential risk, and the chance to improve your supply chain resilience.
During a recession, companies often cut back on sourcing and purchasing parts and flush their inventory. They trim their approved vendor lists, or, as a cost-saving measure, outsource broad supplier relationship management functions to a top-tier supplier. Although these steps may be financially necessary, they frequently limit the company’s supply chain visibility to a small core group of suppliers. When demand picks up again, the company must scramble to inform multiple tiers of suppliers about evolving sourcing and production needs and hurry to refill their inventory buffers.
In this phase, limited supply chain visibility proves to be a detriment. Companies cannot see beyond their core suppliers, and, therefore, have no way of knowing where their supply chain dependencies may be weak or possibly cause a supply chain delay or disruption.
Besides being a victim to a prolonged downturn, the industry faces greater exposure to risks on a few other fronts. First, it’s getting its supply chain ready for demand upticks in mature and emerging markets, each of which require different product, marketing and channel management strategies. Additionally, the auto industry is following the lead of other sectors, namely the high-tech industry, and focusing on the development of more efficient, flexible and agile supply chain models. These directional shifts put quite a lot of attention on sourcing strategies, part-tracking capabilities and supplier and site mapping solutions.
These three aspects provide an effective way to expand visibility across multiple tiers of suppliers while also tracking parts, supplier sites and news alerts about potential disruptions within the supply chain. They offer companies a wider snapshot of what’s happening in the supply chain and create resiliency in the wake of a disruption. During an economic recovery, those critical pieces of supply chain information are not only vital; they may even help companies rebound faster than competitors.
To read more about how the automotive industry is driving ahead with risk management on the dashboard, take a look at our latest automotive whitepaper, or check out here to see how automotive companies are proactively strengthening their global supply chain resiliency.