If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

I read a pair of interesting blog posts from Bob Ferrari about the addition of supply chain risk to SCOR. (See The Inclusion of Supply Chain Risk in SCOR Framework - Part One and The Inclusion of Supply Chain Risk in SCOR Methodology - Part Two).

I was very excited to see that the SCOR model now includes supply chain risk management assessment, tracking and mitigation methodologies.  This is yet another indication that supply chain risk management is becoming even more mainstream.   If the recent financial meltdown has taught us anything it’s that every organization (from large enterprise down to the small business) needs to have a clear understanding of the risks facing them and an effective mitigation strategy to deal with the identified risk.

A second key point that I found very interesting is that the metrics could be clearly separated into two types;

Supply Chain Risk Assessment: These metrics help you assess your degree of readiness for a significant supply chain event.  They measure the degree to which you have assessed your supply chain (and maintained the assessment)  and whether you have mitigation strategies in place.�
Key metrics include:

• Supplier Mitigation Plans Implemented (%)
• Value at Risk
• Age of supplier or customer risk data (Months)

Supply Chain Agility:  These metrics help you assess your ability to respond to events that you may or may not have anticipated in your supply chain risk assessment.  Key metrics include:

• Internal Event Response (Days)
• External Event Response (Days)

Supply Chain Risk Assessment is what people normally associate with supply chain risk management.  However, many people don’t think enough about their ability to respond (Supply Chain Agility).  Being notified an event has occurred, being able to assess the impact and recommend solutions within hours is on its own a very effective method of mitigating risk. 

Imagine this scenario.  A third tier supplier goes out of business.  While they don’t contribute a significant amount to the overall value of your product, the product can’t be built without these parts.  Upon receipt of notification of the supplier’s demise, you identify the current set of parts on order with this customer, identify the parts where this supplier is the only source,  then identify the customer orders that those parts impact.  Within minutes, you can identify the financial impact of the supplier going out of business.  Now your procurement team can start working on sourcing these parts elsewhere.   With the right tools, this agility is possible.

Do you agree?   Do you have any firsthand experience with these types of events?  If so let me know by posting a comment.

Tags: Supply chain risk management

This entry was posted on Monday, November 3rd, 2008 at 9:01 am and is filed under Supply chain risk management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.