Risk – Disruption Can Happen Anywhere in a Supply Chain!

Something as simple as a supply chain can have a serious impact on your business outcomes.  Thinking about what can happen is an important aspect of managing risk.  Here is a supply chain example that once you know what can happen you get to determine what to do:

1. identify, characterize, and assess threats
2. assess the vulnerability to specific threats
3. determine the risk (i.e. the expected consequences of specific types of attacks on specific assets)
4. identify ways to reduce those risks
5. prioritize risk reduction measures based on a strategy

The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk and accepting some or all of the consequences of a particular risk.

Give this a look and see how you would manage this risk now that you have given it some thought. 

The Resilient Enterprise – Yossi Sheffi

MIT Press, 2005

Companies are now exposed to a multitude of unexpected events—from natural disasters such as earthquakes to  terrorist attacks and supplier failures.  They not only need to become more resilient to these shocks, but they can actually increase their everyday competitiveness and gain strength from such disruptions. 

 A company can become more resilient by designing its supply chain for robustness. One of the standard ways is to use redundancy, which is expensive. Other ways to make the system more resilient include: forging strong relationships with critical suppliers while developing alternatives for commodity suppliers; working with interchangeable parts; cross-training employees; deploying flexible manufacturing; utilizing concurrent processes of

design, manufacturing and distribution; delaying product differentiation downstream in the supply chain so products remain in a fungible state as long as possible; and collaborating with trading partners.

These principles create supply chains that are not only resilient but also flexible and that can respond to day-to-day demand changes. One begets the other, because a supply shortage and a demand spike are, at their core, a problem of supply/demand mismatch.

Companies that have built their supply chains to respond to significant demand fluctuations have also built in the ability to respond to supply shortages.

 

 

 

 

One Response to “Risk – Disruption Can Happen Anywhere in a Supply Chain!”

1. Jana Harding says:

   August 31, 2009 at 12:47 pm

   Hi Fay,

   Thanks for pointing out a different way of visualizing a risk map. It was also very helpful for you to point out possible supply chain risks for those that may not have yet assessed their own risks.

   This post is a great resource for small businesses beginning to take a look at their risks.

   Thanks!

   Reply