Category Archives: Risk Management

You CAN NOT Protect Your Supply Chain Against Disruption Without Visibility!

A recent article on protecting your supply chain against disruption had some very good ideas for protecting your supply chain against disruption, but all were useless without visibility as most of them could not be carried out effectively without visibility. How critical is good visibility? Let’s review the suggestions.

Perform a supply chain vulnerability audit.

How can you assess vulnerability without a good supply chain map? Without visibility, how can you see beyond the first tier to find sole-source arrangements in the sub-tiers that are putting your entire supply chain at risk.

Do a rigorous “what-if” analysis.

If you don’t have a good map, you can’t analyze what would happen if you changed a supplier, changed a distribution lane, shifted production, etc.

Implement a strategic supply chain plan.

How can you judge the value of the plan if you can’t fully analyze the effects of its implementation and the chances of the mitigations it contains succeeding in the effect of a disruption? And, as per above, you need visibility for a full and proper analysis.

Create a balance between supply chain network efficiency and operations resilience.

The only way to determine if a plan is balanced is to do extensive what-if analyses that consider various perturbations of, and disruptions to, the normal scenario and see if the chain remains operational. These models can only be built with extensive visibility.

Design long-term strategies.

This also requires significant what-if analysis and detailed supply chain data, which in turn requires extensive supply chain visibility.

However, if you have good supply chain visibility, you can do all of this, and more, and truly secure your supply chain against significant disruption. And then you will have resiliency too. To find out more about the ROI of Supply Chain Resiliency, download the SI Illumination, sponsored by Resilinc.

Don’t blame the lawyers. Blame the bankers!

Recently, listosaur posted the list of the 10 Most Despised Professions in America. According to the list, the most hated profession in America are Members of Congress. SI has to agree with this one as anyone who would shut down a whole country for almost a month over petty party differences deserves a bad reputation, but doesn’t agree with Lawyers being in third place while Wall Street Traders are in tenth. While even the doctor can sympathize with William Shakespeare when he said the first thing we do, let’s kill all the lawyers, the lawyers are not responsible for the current state of the global economy and are definitely not responsible for three of the top four risks as identified in the 2014 Annual Global Risks Report put out by the World Economic Forum.

The people responsible for three of the top four risks, directly and indirectly, are the bankers. According to the 2014 World Economic Forum Global Risks Report, the top four risks are:

  1. Fiscal Crises in Key Economies
  2. Structurally High Unemployment/Underemployment
  3. Water Crises
  4. Severe Income Disparity

1. Fiscal Crises in Key Economies

Many of the fiscal crises playing out around the world are the result of a stock market collapse of one kind or another. Hedge funds, (sub-prime) housing markets, commodity markets, etc. All of which are controlled, and manipulated, by bankers.

2. Structurally High Unemployment/Underemployment

What are the causes of unemployment? While we like to blame job outsourcing, technological advancement, or other trends that tend to displace jobs, the reality is that as old industries decline new industries emerge. In reality, GDP drives employment and unemployment more than other factors that usually get the blame. But the reality is, in the private sector, bankers influence employment and unemployment more than anything else. In a recession, or a slow economy, every hire cuts into profit margins and quarterly numbers, and a company is penalized by the bankers on Wall Street for every penny it is off in its quarterly earnings call. And even as the economy recovers, fearful of hiring too fast and getting penalized by Wall Street, a company will hold off on hiring as long as possible. So even though it is up to the company whether or not it will hire when it has the cash to do so, the fear the bankers install in the company is typically enough to make it hold off as long as possible. Yet again, the bankers’ manipulations of a market are putting us all at risk.

4. Severe Income Disparity

The gaps between the rich and poor are widening every day, and this is threatening social and political stability as well as economic development the world over. And who are the richest people? Typically, wealthy industrialists and bankers. Where do the industrialists keep most of their money? In banks, where it can be manipulated by the bankers to earn those wealthy industrialists even more money. The bankers are making the rich richer and the poor poorer every day.

the doctor will be the first to admit that this is a very simplified view of the matter at hand, but the reality is that, directly and indirectly, the banks have a lot more control over the global economic situation than we should like and their greed is doing more damage and good. We don’t need to be able to measure precisely to tell good from bad. So even if you hate them (and hate them with good reason), don’t blame the lawyers. Blame the bankers. When all is said and done, the lawyers are just a royal pain the in @ss. Bankers, on the other hand …

A Major Disruption to Supply Chains Occurs Every Day – Is Yours Ready?

In 2013, Resilinc, a provider of supply chain resiliency soutions, reported 355 major Event Notifications that significantly impacted all supply chains that were in the vicinity of, or connected to, the event, which included natural disasters (hurricanes, floods, earthquakes, volcanic eruptions, tornado, extreme weather, and other force majuere events), man-made disasters (factory fires/explosions, power outages/shortages, factory shut-downs, chemical spills, etc.), extreme economic events (labour strikes, bankruptcies, port disruptions, levying of major fines, etc.), geopolitical events (acquisitions, rioting, FDA actions, etc.), and recalls, to name a few. Some of these events, such as bankruptcies, were localized to a few dozen companies that depended on the supplier that went bankrupt, but others, such as the Solomon Islands earthquake and tsunami off the coast of Japan or the Haiyan Typhoon in the Philippines (that wiped out a number of coastal cities) affected thousands of sites and the tens of thousands of supply chains that depended on the suppliers that had factories, warehouses, and/or other operations at those sites.

The impact of these events on their respective supply chains ranged from tens of thousands of dollars to hundreds of millions. If a factory that produces a critical single-sourced component for your most profitable product line is destroyed, the costs associated with finding a new source — which include, but are not limited to, manpower costs, premium production costs, premium raw material costs, downtime costs, lost customer costs, etc. — add up quickly and can easily run into the tens of millions for large high tech, equipment manufacturing, aerospace, and automotive companies.

But if your company is prepared, most of these costs can be mitigated. How do you prepare? You make the right investments in supply chain resiliency. To find out how to get support from the C-Suite for these investments, tune into this Wednesday’s webcast on Justifying Investments in Supply Chain Resiliency in 2014, sponsored by Sourcing Innovation and Resilinc.

Justifying 2014 Investments in Supply Chain Resiliency

Are you looking to justify investments in supply chain risk and resiliency programs in 2014?

Can you determine a return on investment (ROI) from investing in supply chain resiliency?

How are other organizations leveraging supply chain resiliency solutions to drive real business benefits?

If you want to learn the answer to these questions, and more, attending the complementary upcoming webinar from Resilinc and Sourcing Innovation on Justifying 2014 Investments in Supply Chain Resiliency on January 29, 2014 @ 11 am PT, 14 pm ET, and 19 pm GMT.

Supply chain resiliency is becoming more important daily because the frequency, magnitude, and associated costs of supply chain disruptions are steadily increasing.

This webinar will examine the different types of cost savings and examples that can be obtained through a proactive supply chain risk and resiliency strategy based on multi-tier supply chain visibility.

Looking forward to seeing you there!

It Shouldn’t Be Hard to Justify Investments in Risk Avoidance

But if it still is, despite the enormous losses that many firms have sustained in recent years as a result of mega-disasters, a recent article over on Supply Chain @ MIT on Justifying Investments in Risk Avoidance by Yossi Sheffi (author of The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage) provides you a good starting point.

The article outlines three possible approaches for presenting a convincing case for investments in supply chain resilience.

Approach 1: ID Situations Where Resilience is a By-Product

Some actions taken by business will increase resilience even though the objective is entirely different. Examples include investments to insure superior service, postpone production (to adapt to market shifts), and adapt to different (raw) materials and components if the current primary (raw) material or component becomes unavailable. If another business justification can be made for the investment that will be looked upon more favourably by the C-Suite, focus on that justification (and that justification alone).

Approach 2: Highlight Other Benefits

If the investment is, or will be, primarily to support resilience and no business case can be made without mentioning resilience, be sure to highlight any and all additional benefits the business can expect to receive. For example, if the investment in resilience will improve operational efficiency, provide additional capability, or even improve the image of the organization it will be worth it. The example Sheffi provides is that of Walmart’s Emergency Operations Center (EOC) that manages flow of supplies in crisis situations. Many days before Hurricane Katrina hit the Gulf Coast in 2005, Wal-Mart had prepared 45 trucks full of critical supplies at its distribution center in Brookhaven, Mississippi. By deploying these trucks Wall-Mart reopened 66% of its stores in the affected area within 48 hours, and within one week 93% of stores were reopened. This boosted Walmart’s image in a way nor advertising campaign ever could!

In addition, a resilience effort that maps the supply chain, at least for critical goods and services, down to the raw material suppliers not only supports quicker responses to crises, but can also be used to support social responsibility and sustainability audits. Not a money-maker by any stretch of the imagination, but it can do wonders for the brand if you can show that your supply chain is, for example, free of conflict diamonds when your competition’s supply chain is not.

Approach 3: Hitch Resilience to Other Goals

In this approach, when you cannot find another justification or highlight the benefits enough to get approval, you take on the role of a PR spin doctor and show how the effort can contribute to another, sometimes entirely unrelated, goal. The example given by Sheffi in this case is if you need most, or all, of your staff to be able to telecommute in the event of a crisis, present the project to support this as a diversity and inclusion initiative that would allow mothers to stay with their babies and empower disabled employees to stay active. It’s not an optimal approach by any means, but if the shoe fits …

It’s good advice from a great article. And for those of you in logistics, Sheffi recently published Logistics Clusters: Delivering Value and Driving Growth that you might want to check out. (Clusters can also be a form of resilience.)