Before going into the list of biggest risks, here is a “preamble to risks”. You need to be familiar with emergency procedures. This means the entire Chain (purchasing, etc.). The Control Tower idea, when done correctly and in conjunction with other fixes can be very successful. Visibility is a prerequisite to supply chain agility, responsiveness and almost everything in the supply chain. Companies need to find the right people, provide continuous training and allow them to learn and develop by rotating their roles in the supply chain.
It’s not the first time the Bay Area has been rocked by an earthquake, yet events like a recent magnitude-6.0 earthquake never fail to serve as a wake up call to small businesses in California and beyond. Guess what? Earthquakes–though, often severe–aren’t the biggest ecological events owners need to be concerned by.
Weather-related storms like hurricanes, tornadoes and Nor’easters can wreak far more havoc.
Recently Scott Koegler published an article on “Fixing Your Supply Chain” in which he quoted the “Top Five Opportunities In Your Supply Chain” per OPS Rules Management Consultants. He then “threw down the gauntlet” for others to list their own Top 5, and see if these match. I am accepting the challenge!
Here is my game plan: I’m going to identify and add other vendors who are good at fixing your supply chain and see what THEIR opportunities might be. Then I will pick MY top 5 and tell you why I picked them.
Recently we wrote about “Supply Chain Management and Logistics Risk”. While we did not get specific as to which risks are “bigger”, we did cover a lot, even pirate ships. Now, Zurich Insurance Group, through the Business Continuity Institute (BCI) has done a survey and gotten specific about causes of supply chain disruption. The top three: IT, weather events and outsourcing failures.
Businesses must put more effort into pre-planning for business interruption according to a survey by Zurich Insurance and the Business Continuity Institute (BCI). They are concerned about supply chain disruption and term it a “blind spot”. We are concerned too. Zurich recommends mapping out your supply chain and quantifying each supplier by financial stability, geopolitical issues, et al. If you have a lot of global suppliers, this could be a tall order. I think Zurich is sitting in an “ivory tower” and not a “SCM Control Tower“.
So we started to look at other ways to assess risk and found Dr. David Simchi-Levi of MIT. Dr. Simchi-Levi has developed what he calls a Risk Exposure Index™
Dr Simchi-Levi takes the approach of understanding the nature of various risks, quantifying the supply chain risk and finally by addressing these risks through supplier segmentation. Risks range from the controllable execution problems or “known-unknown” to the uncontrollable natural disasters called “unknown-unknown” (which he refers to as “black swans“).
As supply chains grow in size and importance, your company will need to pay closer attention to production facilities around the world. What if a disaster forced a shut down at a critical plant thousands of miles from your headquarters? Do you have a process in place to deal with it?
You need to first of all establish procedures for each plant and for each possible type of disaster. This includes lower-tier suppliers too (your extended supply chain). Know how each plant interacts with the “grand plan” of your supply chain, as well as with other components of the supply chain. Not knowing this could surprise you with a “domino effect” where the loss of one plant shuts others down for lack of parts. Work with suppliers to educate them about your disaster plan. Conduct reviews with them. When you are building your plan, concentrate on recovery and alternatives.
Just what kinds of disasters are we planning for? You name it and it has probably happened somewhere in the world. We know, of course, about natural disasters: hurricanes, tornadoes, floods, snow. Add to this list terrorist attacks, health epidemics, theft (physical or data), all the way to pirates capturing your ship.
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