Category Archives: Risk Management

Could You Run Your Supply Chain from Another Country for A Month?

A recent post over on the HBR Blog Network on why we’re relocating our HQ to Dubai for one month about Starwood’s one month move of their HQ to Dubai for one month brings up an interesting question:

 

Could you run your supply chain from another country for a month?

 

It’s an important question. Because if you can’t, you’re not prepared for a disaster. And given that the likelihood of a disaster shutting down your primary location is increasing as the number of natural disasters rise each year (thanks to global warming), you should be. While the risk of a disaster shutting down your Supply Management headquarters is likely small compared to the risk of a significant disruption impacting your supply chain (which is approaching 85% for many companies), the risk is there. And you have to be ready.

Furthermore, if you have the right supply management infrastructure, you should be just as capable of running your supply chain from another country as you are of running it from a temporary location fifty kilometres away. If you have a true visibility solution, you just need an internet connection and you know where everything is. If you have a good sourcing and procurement platform, you can source and order whatever you need from anywhere. And if you have a good e-payment solution, you don’t need to pick up a check from a PO Box. Good distributors have their own on-line visibility and transportation management systems, and all of your 3PL and Import/Export Brokers can be connected with an e-Document Management solution. Plus, if you truly are global, you should be able to set up quickly near a major supplier who wants to help you out in the local country to keep you as a major customer.

In other words, if you couldn’t pick up and temporarily relocate your Supply Management headquarters at a moment’s notice, you probably don’t have a modern Supply Management office running on a modern Supply Management platform. And you should. Especially since there might be no better way to really learn a major market that you are sourcing from.

Supply Chain Planner — Here are Three Solutions to Nearly Every Problem

A recent piece over on Supply Chain Cowboy on “Three Silver Bullets to Solve Nearly Every Supply Chain Fire” simultaneously enthralled and shocked me because I cringe every time I hear that air freight is one of the three solutions to your current supply chain dilemma, as it is a prime indicator of a major supply chain issue — specifically, lack of planning.

But there are ways to avoid the issue. The first one is:

Supply Chain Forecasting Systems

A good, modern, supply chain forecasting system is the best way to figure out not only what you are going to need, but when you are going to need it and when you are going to have to get the orders in and production started in order to meet shipping deadlines and avoid the need for air freight.

The second way to avoid the issue is:

Supply Chain Visibility

(Near) real-time visibility into where your stuff is from your suppliers, their suppliers, and their raw-material suppliers. All delays have ripple effects, and the best way to prevent a hiccup, or disruption, that will force you to have to use air-freight is to have real-time visibility all the way through your supply chain so you can be aware of a potential issue as soon as it happens.

And the third silver bullet, I’m sad to say, is:

Standby Air Freight

Good forecasting will significantly reduce the number of emergencies and the number of times you have to ship air-freight to meet a deadline, and good supply chain visibility will reduce this number even further as you will be able to order from secondary suppliers or ship through back-up carriers when hiccups or disruptions do arise to meet the deadlines laid out in your forecasting system. That being said, no technology will completely eliminate the need. There will always be unexpected events that will cause interruptions at the last minute where the only recovery option is to air freight reserve stock. If the Super Panamax ship gets delayed a week in port because of customs issues after your cargo is loaded, there’s nothing you can do. Or if a second tier supplier gets cut off because of a civil uprising and you have to arrange for the first tier supplier to get replacement product from another second tier supplier further away, there may be no other way to get the product fast enough. That being said, the number of instances where there is no way but up should be few and far between with good supply chain planning and visibility systems.

You Need to Get a Handle on Your Global Trade Risks – FAST!

Because, if you don’t, in three months, one in every five shipments you make is going to result in a large fine! By the end of May, the United States Customs and Border Protection (CBP) is expected to issue a proposed rule that would make various changes to increase the accuracy and reliability of the advance information submitted under the Importer Security Filing (ISF or 10+2). No big deal, right? Wrong! It is further expected that the final ISF rule will follow later this year and that the CBP will, upon release of the new rule, begin to enforce (the full extent of) the penalties associated with the ISF.

This is a major risk for most organizations as the most recent statistic that is publicly available where 10+2 compliance is concerned is a compliance rate of 80%. In other words, 20% of shipments are not compliant! It’s hard to say why. It could be because, up until now, the CBP has not issued much (if anything) in the way of penalties for violations and failures, and many importers, (customers) brokers, and forwarders are taking advantage of the situation and not doing anything to improve their processes and procedures when they (regularly) make late and inaccurate filings. And if this is the case, this is a dangerous game — for you!

We have to remember that the CBP has the right to enforce a minimum fine of $5,000 for EACH 10+2 violation. If you do a lot of importing, this will add up fast if you are in violation with every fifth shipment. Even if you only did 10 inbound shipments a month, you could expect to lose at least 120K a year to fines! And that’s (significantly) more* than what an average mid-size organization can expect to pay for an annual license to a basic SaaS e-Trade Document management system these days. So they should get one, and begin to get a grip on their global trade risks, fast, before they burn money needlessly.

* A good (end-to-end) global trade management system will still run you six figures, but it goes way beyond e-Document management and provides multiple ROI in terms of process improvement, tactical man-hour reduction, global supply chain visibility, compliance monitoring, etc. (But if you’re small, or just getting started, you can start with just the e-Document management and ease your way into a bigger system.)

Getting a Grip on Multi-Tier Supply Chain Risk – A Resilinc Commentary


Today’s commentary guest post is from Jon Bovit, Chief Marketing Officer of Resilinc, a provider of supply chain resiliency solutions for industries including high-tech, medical devices, and automotive manufacturers. SI recently covered Resilinc in detail in Do You Know What’s At Risk? Resilinc Does! and Will Resilinc Resonate with Your Supply Chain.

Today’s supply chains are complex, global, and highly dependent on
sub-tier suppliers. Long term sustained success of companies is hugely dependent on the resiliency of their suppliers. Despite this, most supply chain leaders are unable to readily access critical supplier information necessary in order to manage business effectively. Supply chain leaders need a solution that maps the global supply chain across multiple tiers, identifies critical supply chain dependencies, exposes critical vulnerabilities and single points of failure, manages risk mitigation across the organization, and optimizes resiliency practices throughout the organization.

Despite popular opinion to the contrary, the harsh reality is that measuring supply chain risk at the supplier, or even the location, level is inadequate for today’s global and complex supply chains. In order to properly managing supply chain risk, a company must start by mapping its global supply chain down to the individual products, parts, sites, and revenue across each of the multiple tiers. Once the multi-tier supply chain is mapped down to the product and part level, with the proper methodology, the company can calculate risk scores based on (multiple measures of) financial risk, location (economic and geopolitical) risk, and recovery risk (recovery time and BCP). By evaluating supply chain elements based on inherent financial, location and recovery risks (which align well with the risks identified in the recent World Economic Forum Global Risks report), supply chain practitioners can choose the most effective mitigation
strategies.

As an example, by utilizing the above methodology, the Resilinc platform is able to quickly identify high risk, high revenue, single sourced parts for a high-revenue producing business unit. The high risk may come from long recovery times from a specific supplier manufacturing site in Malaysia or Japan. The customer can then come up with specific risk mitigations strategies for those specific high risk, high revenue single sourced parts before a disruption occurs, which could save the company millions in losses and unmeasurable damage to its brand. If risk was measured at the supplier level, these details would have been missed completely.

Customers should not only focus on assessing and mapping risks based on their supplier global footprint and site locations, but also should capture sub-contractor and sub-tier supplier dependencies, site activities, part origin, alternate sites, recovery times, emergency
contacts, and business continuity planning (BCP) information. By focusing on identifying critical vulnerabilities and the highest risk exposures using quantitative scores and impact analysis at the product, part, and site level, leaders can direct limited budget and resources into the right areas for optimal protection against future supply chain disruptions.

Thanks, Jon!