Category Archives: Risk Management

Your Global Supply Chain is Getting More Dangerous By the Day

As per this recent blog post over on the Supply Chain Management Review on how escalation in piracy places supply chain under pressure, ocean piracy has it an all time-high with 142 attacks worldwide in the first three months of of 2011. Yikes!

The International Maritime Bureau ( IMB ) has been tracking piracy worldwide since 1991 and the number of attacks in the first three months of this year are higher than any number ever recorded. To be precise, there were 142 attacks that resulted in 45 vessels being fired upon, 45 boardings, 18 hijackings, 344 hostages, and 6 kidnappings.

If the trend continues, energy AND insurance prices are going to go through the roof, or, in this case, the stern.

Keeping Strategic Decisions on Track and the CFO Happy

A recent article in the McKinsey Quarterly on “How CFOs can keep strategic decisions on track” is a good read for any CPO looking to impress the C-Suite. Noting that judgement can often be colored by self-interest, and that CFOs are generally the most disinterested parties where strategic decisions are concerned, the article points out how a disinterested CFO can often provide hard financial data to counter inherent biases.

This implies that a great way to keep your strategic supply management decisions on track, keep the CFO happy, and impress the C-Suite is to run your proposals, with your projections, by the CFO before you take them to the rest of the executive suite. And if you need number crunching help, and they have staff, the CFO, who will likely be impressed that you asked for help before making a final recommendation, will probably be glad to lend you some support to confirm or verify your projections. Not always, but much more likely than if you make a presentation first and ask for help later.

What’s the Biggest Problem with Sourcing from China

Quality? Supply Reliability? Or Management Expectations?

In last year’s CPO Agenda inaugural debate on “Assimilate to Accumulate”, Martin Lockstrom, of the BMW-SMI Center for Purchasing and Supply Management at China Europe International Business School, said that the most difficult thing is not necessarily to manage the Chinese suppliers but managing HQ expectations on these kinds of things.

With all of the issues making the news in recent years with respect to outsourcing from China around supplier quality, reliability, and intellectual property, it’s important to remember that the biggest issue is not always the supplier, who may respond well to sincere attempts at supplier improvement initiatives, but management expectations. It is amazing how many executives still believe that outsourcing will fix all their problems and that, because outsourcing to China has been going on for over a decade, the supplier will deliver high quality and cost savings off the bat. While the irrational exuberence is not at the high it once was, there are still executives who hold on to unfounded beliefs because “it worked for the competition”, failing to realize that the competition may have worked years on supplier development to get the performance they are achieving.

Done right, sourcing from China will pay off, but great results can still take time.

Key Questions When Assessing Supplier Health

A recent article over on Industry Week that indicated that it is “time for a supplier health check” made a good point — Tier 1 suppliers may need to expand globally in the high-growth markets more quickly than they had originally anticipated, and manufacturers need to know if their Tier 1s are up to this challenge. In order to make this assessment, they have to do a detailed supplier assessment of their current Tier 1 suppliers, which should ask, at a minimum, these questions:

  • Does the supplier have access to capital to retool and meet an increase in demand?
  • Does the supplier have the talent to support a ramp up? Or did they do significant layoffs?
  • Does the supplier have the leadership to accomplish a ramp up? Or was the management team significantly reduced by layoffs or attrition?
  • Does the supplier have the right technology to support new systems and processes?
  • Does the supplier have the right financial controls in place to support a larger operation?
  • Is the organizational structure suitable to expansion?
  • Does the supplier have a viable business plan to support an expanded operation? Has it been executing against the plan?

If any of these questions yield negative answers, the supplier might need to be replaced. The alternative, if the supplier is critical, is for the organization to take an ownership position in the supplier and get it back on track. Either way, the supplier base needs to change.

Do You Really Think It’s A Good Idea To Have Your Head In The Clouds?

eWeek.com recently published an article on how “many data centers [are] unprepared for disasters” that’s downright frightening. According to the recent AFCOM “State of the Data Center” survey that polled 358 data center managers from around the world,

  • more than 15% of respondents said their data center had no plan for backup and recovery,
  • 50% of respondents have no plan to replace damaged equipment after a disaster,
  • 65% have no plan to deal with cyber criminals!

Well sufferin’ cats!

This says that if you outsource your data center management, you have a:

  • 15% (1 in 7) chance of losing your data
  • 50% (1 in 2) chance of being down for an extended amount of time after a natural disaster
  • 65% (13 in 20) chance of getting screwed if you’re targetted for cyber crime.

Do you really like those odds?