You Need a Plan to Mitigate Supply Chain Risks. But You Also Need a Platform.

A recent article over on Supply & Demand Chain Executive on Navigating a Supply Chain Management Toolkit noted that with a plan in place, organizations can quickly respond to any changes and help mitigate any supply chain risks.

Which is true, but how much of the risk they can mitigate is the question.

The article, which is very good and definitely worth reading (so check out the link), noted that problems arose as a result of COVID and disruptions since because many organizations use just-in-time inventory management (which we’ve already noted should have ended by now along with seasonality). The article also noted that the problems were often exacerbated by the fact that order processes were often not documented effectively and, in general, most organizations don’t spend the time and resources to really manage their supply chain. All of this is correct, as is the observation that these challenges can be alleviated with wholly embracing the tried-and-true methods for effective supply chain management because effective processes, measurements and accountability are … key to a supply chain that works for an organization.

But, on their own, not the key. Today, you also need a platform that enables the organization to:

  • quickly detect a risk event has occurred
  • quickly analyze the impact
  • quickly initiate any pre-defined mitigation plan
  • quickly implement new decisions and processes where the mitigation plan isn’t sufficient and doesn’t exist
  • monitor the impact of the risk event and the response in near real time

Otherwise, your process could be too slow, your measurements inaccessible and/or unrecorded, and your accountability (under audit) non existent.

For example, the article indicates you should start by getting a better grip on inventory management (which is correct, no product, no business for most companies), and that involves a self-assessment, forecast accuracy review, and inventory segmentation. All correct. But that doesn’t help you when all of a sudden there’s a fire in the factory, a strike at the port, or a strait/border closing. What do you do then?

It also tells you that you should focus on better supplier relations, which is also extremely important, and focus on vetting suppliers before you onboard them and then measuring them and computing the total cost of ownership of keeping them, which is also very important as suppliers should improve over time and costs should not inch up faster than inflation. It also mentions the importance of proper strategic sourcing (matrices) to get the right products from the right suppliers. Another definite. But fails to tell you what you do when all of a sudden a key supplier can’t deliver or becomes unavailable.

The answer here is you use all of your good relationships and data to immediately identify the next best supplier. If you were splitting award, you try to shift to the other supplier (if they can handle the volume — if you were doing an 80/20 split and the 80% supplier suddenly became unavailable indefinitely, the 20% might not be able to support you, or at least not for very long, and you will have to add a new supplier to the mix. If you were doing proper sourcing, and proper supplier vetting before including them in an event, then you already have potential suppliers — the runners up from your last event. A good platform will let you immediately identify them and immediately start another sourcing event to onboard a new supplier as fast as possible.

If you have a good logistics (sourcing) platform, and your primary carrier / route becomes unavailable, you may be able to identify another carrier / route that will get you the products on time, or at least be able to accelerate an order from a secondary source of supply while you wait for the first source through a lengthier route.

The point is, while you need great processes, measurements (to indicate if something is taking too long, such as an order acknowledgement or a delivery, which can be a sign of a potential risk event materializing), and accountability (to show you made efforts to detect and mitigate risks in a reasonable time frame), you can’t measure, execute processes, or provide unquestionable audit trails of accountability without a proper platform. Never forget that. (And for help, you can see our Source-to-Pay series which helps you to identify where to start with your acquisitions and what vendors you might need to look at.)

And again, remember to read the article on Navigating a Supply Chain Management Toolkit as it will help you understand the basic processes you need to put in place.