IndustryWeek has published an excellent article entitled “Do’s and Don’ts on Managing Risk in the Supply Chain” that describes some do’s and don’ts in supply chain risk management.   I’ve reproduced the headings here, but the short titles don’t really do justice to the do’s and don’ts in the article.  I strongly suggest you follow the link to the article to get the whole picture.

Do:

• Establish closer collaborative relations with distribution channels.
• Implement multi-echelon inventory optimization
• Incorporate rapid scenario planning in the sales & operations planning (S&OP) process
• Improve supply chain visibility
• Streamline programs with strategic customers

Don’t:

• Stay short-sighted
• Sacrifice other strategic initiatives.
• Once and done (Don’t do risk assessment once and stop…things change.  You need to review and revise!)
• Focus on “operational noise.” (and miss the big strategic risk)

To this list, I’d like to add a few additional ideas;

Do:

• Improve your ability to respond:  There are two major reasons why responsiveness is so important to supply chain risk management.  1)  despite your best efforts, the risks that you have prepared for might not be the event that actually happens, in which case, you won’t have an reasonable mitigation strategy.  2) Despite your best efforts, the mitigation strategy for a given risk fails when implemented.  (for example, the alternate supplier can’t manage the volume, even though they said they could).  In these cases, having a culture of responsiveness and the tools to support it can mean the difference between a major event and a minor bump in the road.
• Prioritize your risk management strategy:  Assessing suppliers and developing risk mitigation strategies are difficult to do, time consuming and often expensive.  In my opinion, this is why many companies still haven’t progressed very far in their risk management projects.  Companies need a logical system with which to tackle risk management.  What better way than starting with those parts and suppliers that would have the most significant impact on your company if they weren’t available.  There is no point doing a risk assessment on a supplier of commodity goods if you can go to the supplier across the street and get more.  It’s those parts that contribute most to your revenue that will have the biggest impact if you can’t get them.  These are the parts (and the suppliers of those parts) where you should begin your risk assessment and mitigation strategies.

Don’t:

• Forget the suppliers of your suppliers:    A supply chain is more than one link.   When assessing your suppliers, don’t forget to look beyond them to those suppliers that supply them.  Your supplier could have very little risk associated with them; they are financially stable, they are in a politically stable location,  they don’t get severe weather or earthquakes.  By all assessments they are nothing to worry about.  But where does this supplier get its supply from?  If your supplier can’t get parts you can’t get parts and that is still a risk.

Do you have additional Do’s and Don’ts?  If so, send us a comment and we’ll add them to the list!

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Tags: Supply chain risk management
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