Are There Hidden Risks in your Supply Chain?

Many organizations have spent years streamlining operations, reengineering processes, integrating with partners, implementing enterprise systems, and moving production to low-cost, offshore locations. They have done all of this in an attempt to improve the service they provide to customers at a more competitive cost. However, creating a global supply chain has brought new risks that you may not have encountered before.

More recent events such as terrorism, strikes, piracy, political instability in Third World countries, and last year's shutdown of West Coast shipping docks—have awakened managers as never before to supply chain risks, some of which had been introduced or heightened by the very actions companies had taken to drive costs out of their supply chains. Currently there are a number of significant well-documented challenges facing international and domestic transportation markets such as rising freight rates, infrastructure disrepair, and the new cost of security in both time and money.

The simple fact is that in today's longer, more global supply chains, product moves over greater distances and across more borders than in the more localized supply chains of the past. The coordination and execution required for international shipments has always been a challenge, but now we find that market conditions, security considerations, and regulatory pressures are converging in such a way that increase risk significantly. But "Many risk factors have developed from a universal pressure to enhance productivity, eliminate waste, remove supply chain redundancies, and drive for cost improvement," says , of Productivity Constructs of Palm Springs, California.

Today an inverse relationship between risk and efficiency supply chains has been established; supply chain managers can no longer focus solely on cost reduction—any calculation of a supply chain's return on investment must also take customer satisfaction into account. "We're trying to make sure we operate the supply chain more efficiently and decrease costs as we increase service levels to customers," says Roy Strauss of Strauss Consulting. Risks exist across the entire length of supply chains, and are as diverse as political instability, exchange rates, carriage capacity, shelf life, and customer demand. The risks will be the subject of future Supply Chain Experts blogs but include:

1. Terrorism

2. Piracy

3. Currency Fluctuation

4. Government Instability

5. Strikes

6. Quality Considerations

7. Energy Cost

8. Transportation Problems

9. Natural Disasters

10. Rework Costs

11. Supply Chain Complexity

12. Global Interdependence

Balancing these competing priorities means that it's impossible to eliminate risk entirely. But there are steps you can take to mitigate risk while keeping your supply chain costs as low as possible. First, however, a little background on the nature of risk and how companies seek to deal with it. It may be time for you to rethink your global supply chain strategy in a manner that mitigates some of these risks and optimizes your ability to consistently deliver product to your customer at the lowest possible cost.

So, what can you do to mitigate these risks while insuring low cost leadership? You can call Supply Chain Experts who will help you assess the risks in your supply chain;

1. they will help you think strategically about risk versus cost,

2. they will help you broaden the cooperation with the trading partners in your supply chain,

3. help your organization understand the trade-offs and make better decisions that will insure your ability to take care of your customers,

and help your organization understand that you cannot ignore risk solely because it is difficult to quantify.

Your organization should be concerned about supply chain risks and Supply Chain Experts can help your organization design an effective system that creates a balanced cost/risk relationship that will protect your organization and your customers today and into the future.

Dr. Edward F. Knab BLOG

Productivity Constructs, Inc.
800 660 8718 office
949 413 7333 mobile
ed@edwardknab.com
www.productivityconstructs.com
More Supply Chain Experts Blogs

Dr. Knab is an academic practitioner and seasoned Global Supply Chain expert whose company, Productivity Constructs, is focused on driving cost and inefficiency out of the Global Supply Chain. Dr. Knab can be contacted for speaking engagements, coaching, or consultation at efk@productivityconstructs.com, ed@ewardknab.com.