In a recent article, Koray Köse pointed out that Geopolitics Now Lives in the P&L because it can re-price your inputs, trap working capital, and./or change who you are allowed to buy from or sell to, all with the stroke of a pen by a single individual entrusted with too much power.

And, as Koray points out, most organizations are structurally unprepared. This is partially because fewer than half of companies have visibility beyond tier-one suppliers, but mostly because the majority of organizations have to scramble and allocate resources to figure out whether or not the event has changed cost, liquidity, access, or structural dependency.

And, as Koray points out, organizations that don’t know what the real impact of major events on them are will:

• panic dual- (or tri-) source and increase cost without reducing real risk (as sometimes they’ll source from another distributor or supplier with the same risk in the same region subject to the same events)
• knee-jerk re-shore, waste 18 to 36 months, and increase costs without addressing the core issue
• sign emergency renewals at premiums for risks that never materialize
• continually react in a manner that achieves nothing

and, simply, burn time and value by not doubling down focus on the events that really matter to them. Because they don’t know what those events are.

That’s because they haven’t

• identified their key product lines,
• broken them down into components,
• identified those that have limited supply items or rely on rare earths or other limited substances,
• mapped the supply chains for those limited items, rare earths, or other limited substances, and
• marked the supply chains they (and their current suppliers) are currently using

so that, when their constant 24/7/365 global monitoring solution detects a significant event, they can quickly determine

• what active supply chains it impacts,
• what substances, rare earths, or items could be impacted,
• to what extent they are relying on those substances, rare earths, or items,
• what components they are in,
• what product lines are impacted and to what degree, and
• what alternatives the organization has

This way you instantly know

• what the impact is,
• what other options you have, and
• what the cost of those would be

If the event impacts a supply that is easily obtainable from other, unaffected regions; that is only used in a couple of low revenue (and lower profit) product lines, or that can be replaced simply by shifting supply to other suppliers with which you have existing relationships (and contracts), you can simply ignore it; but if the event could cut off a key substance, rare earth, or part, and you were sole sourcing, you need to leap into action immediately to contract another source of supply (before your competition does and its gone).

The only way you can do this is if you did a proper risk assessment of each major component, raw material, and item, and tracked your current and potential sourcing options. i.e. you did proper risk mitigation planning.

But if you take the time to do proper category assessment and risk mitigation planning, you’ll be well on your way to Köse’s Sophisticated Simplicity that will allow you to identify the one or two events that really matter, address those, and get on with business while the world burns around you. (Or, you can continue to react blindly and burn with it. Your choice. Either way, follow Koray. You can’t manage supply without being aware of what threatens it.)