Supply Chain Risk Management (2)

Supply Chain Risk Management (2)

Supply Chain Risk Management (2)
Supply Chain Risk Management (2)

Eliminating all risks is neither possible nor cost effective, so companies must identify the most vulnerable components of an operation and apply a greater share of resources to the most critical components.
The presence of differing risks at differing levels of an organization underscores the importance of defining the context within which a risk-management program is implemented. This includes suppliers, manufacturing, logistics (e.g., warehousing and distribution), customers, and other elements that can affect the value chain.  

Download Also:
Organizations look global for a number of reasons, in particular cost savings, but the savings can prove to be more elusive than anticipated.  Mapping supply-chain processes can help enterprises understand the potential risks that exist as well as the organizations involved. The risk analysis process should estimate the likelihood and consequence of risks facing a firm and accordingly prioritize them for ultimate treatment.

Investing the time and resources to fully understand your firm's exposure to supply disruptions (both the likelihood of a disruption occurring and the operational impact) helps to determine the optimal portfolio of supply risk management strategies and supply chain planning tools beyond the typical mitigation approach.
The traditional approach to business interactions with the supply base focuses on buyer power versus supplier power that can seem, and often is, adversarial. In contrast, some organizations have adopted the best practice of assessing risk alongside suppliers for mutual benefit. The old adage "United we stand, divided we fall" acquires a critical relevance in the modern inter-dependent business environment.

In order to identify critical capabilities and risks to those capabilities within the supply base, a collaborative supply-base landscape assessment leverages data on each supplier’s capability, capacity and cost.

Supplier elasticity measures the impact to a supplier’s cost structure from varying demand profiles while maintaining overall lead time and product quality requirements. Mobility considers the relative ease of moving manufacturing capability from one supplier to another while considering the importance of the capability, how many programs are affected, and the ability to overcome any intellectual property-related obstacles. Taken together, these two viewpoints result in the Supply Base Landscape Assesment and identify which suppliers and capabilities are critical and/or represent a systematic risk to the buyer.
Once risk management priorities have been identified, the establishment of response plans—which programs and/or operation units are held accountable for executing, and how the enterprise supports and monitors how well the operating units manage these plans—is instrumental to making the enterprise-level risk management efforts work. Some risks that organizations face, such as those inherent in their processes, suppliers, or their regulatory environment, can change quickly. As a result, firms need to monitor risks and how to address them over time.

Despite widespread awareness of the importance of sound supply chain risk management, a study published in 2014 by the Supply Chain Management Faculty at the University of Tennessee ( indicates that 90% of the organizations surveyed DO NOT CONSIDER RISK in their outsourcing initiatives. If these findings can be extrapolated,  there is a huge untapped potential for risk management to become a critical competitive advantage for those organizations that embrace the practice.

Related Topics:

                                                        Frank Velunza Martinez
Experienced commercial executive with strong interpersonal skills and the capacity to work in teams or independently, under pressure and tight deadlines.  Previous positions have been in management, strategic global sourcing and distribution within Supply Chain Management. I have mostly been involved in procurement of complex technology projects, security, IT, consumer and automotive products. 
Recently completed a Master Certificate in Supply Chain Management and Procurement with the Michigan State University. I am currently working on APICS-CPIM and pursuing SCMAO (formely known as OIPMAC)-CSCMP in order to certify my skills in North America. I am also enrolled in several other courses.  As an insatiable self-learner I am passionate about inclusive leadership, strategy, management, efficiency and economics.

Post a Comment

Previous Post Next Post