Category Archives: Supply Chain

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!

Have We Reached The Supply Chain Plateau Part IV?

In our last post, we discussed that the results of a recent survey by Greybeard Advisors that asked “has our profession advanced, or regressed?” led Robert Rudzki to conclude that overall, based on the companies that participated in the survey, we cannot show that our profession has advanced during the past four years; in fact, at some companies, there has been a return to more tactical approaches and objectives.

Why is this?

Some insight is provided by the survey responses to the “write-in” topic that asked for the single most important factor that worries me about ensuring our supply management organization will be successful is. The top themes from the responses provided were:

  • Lack of ongoing commitment from top-level management and buy-in from the rest of the company
  • Lack of proper planning and budgeting from our internal clients
  • Incompatible objectives of multiple business units
  • Lack of bandwidth / resources to do the job properly
  • Need less focus on tactical wins in favour of larger, greater returns (from doing the job strategically)
  • The challenge of how to invest in the future of the department while simultaneously being told to reduce budgets

In SI’s view, it still comes down to the manpower capability issue, which is a direct result of the lack of education and training that pervades our space. If everyone was suitably educated and trained:

  • top-level management would see the importance of the function and their commitment to its success and provide the appropriate support
  • other units would understand what is required of them in terms of financial and manpower resources
  • business unit objectives would be appropriately aligned to maximize success
  • sufficient resources, including sufficient training on such resources, would be provided
  • the focus would be on long-term gains vs short term wins and
  • training would be emphasized, and mandated, not cut!

In summary, SI will state again that people have to be educated and trained at all levels of the function, and until that happens, up-to-date technology or not, there is not going to be any progress.

Have We Reached The Supply Chain Plateau Part III?

In Part I, we noted that Lora Cecere discovered, while analyzing the balance sheets of process companies over the past decade, that the average process manufacturing company has reached a plateau in supply chain performance as noted in a recent piece over on Supply Chain Shaman which stated she believes we have reached the supply chain plateau.

In Part II, we noted that growth has stalled, and asked why it has stalled. Lora conjectures that while complexity has increased, many well-intentioned executives lack the understanding of the supply chain’s potential or how to manage the supply chain as a system. This means that even though individual projects are getting great results, departments as a whole are not performing as well, and being managed even worse. Why? One conjecture, as implied in Lora’s post, is the current state of supply chain technology and ERP (and forecasting) systems in particular. And while there is a discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again, SI does not agree this is the core problem. The core problem is manpower capability. Not only do most executives not understand the supply chain from a holistic perspective, but neither do the function managers … who often do not even understand the best practices associated with their job because of the lack of education (and training).

But is this the whole picture? Robert Rudzki, of Greybeard Advisors, recently ran a 4-part series on the SCMR blogs where he summarized the results of a survey last quarter which asked “has our profession advanced, or regressed?”, which was administered as a result of anecdotal evidence that Procurement and Supply Management has regressed at some companies during the past 3 to 5 years. The survey, which was primarily filled out by Supply Management function leaders or direct reports and which drew interest from better-performing companies, produced some interesting results:

  • Only 38% of the respondents agreed with the statement that their “top management really understands and appreciates the enormous potential of modern supply management”, which is lower than the 47% who agreed with the statement in Greybeard Advisors’ 2008 survey
  • About a third of respondents indicated that they developed and presented a business case, also lower than the original survey
  • Not surprisingly, less than 30% of respondents indicated that “top management strongly supports the supply management organization with sufficient resources and budget”, also lower than the original survey.

And led Bob to conclude that overall, based on the companies that participated in the survey, we cannot show that our profession has advanced during the past four years; in fact, at some companies, there has been a return to more tactical approaches and objectives. Ouch! Why is this?

Have We Reached the Supply Chain Plateau? Part II

Yesterday, we noted that Lora Cecere discovered, after reviewing balance sheets of process companies over the last decade, that the average process manufacturing company has reached a plateau in supply chain performance. And, moreover, that the majority of progress improvements over the last decade came from lengthening days of payables and squeezing suppliers. That’s Not Progress!

So have we reached the supply chain plateau? SI doesn’t think we have, but agrees that growth has stalled. But why has it stalled?

Lora conjectures that while complexity has increased, many well-intentioned executives lack the understanding of the supply chain’s potential or how to manage the supply chain as a system. So, while individual projects are getting great results, departments as a whole are not performing as well, and being managed even worse. SI has to agree.

Why? One hypothesis, as implied in Lora’s pot, is supply chain technology, and ERP (and forecasting) systems in particular. As Lora notes, the current state of supply chain technologies is such that, in an average company, the greatest gaps are in the areas of the greatest importance. Gaps in supply chain planning are high, and the ability to use the data from ERP and order management remains a gap.

This is true. And SI has to agree with Lora when she says that there is a discontinuity and we need to declare the APS and ERP systems of the 1990s obsolete and start again. But SI doesn’t think this is the core problem. The core problem is manpower capability. Not only do most executives not understand the supply chain from a holistic perspective, treating each step as its own function (and disassociating NPD/Design from Sourcing (a manufactured product) from Logistics and Distribution, when they all have to be examine and managed as part of an integrated supply chain, but neither do the function managers. Moreover, these function managers often do not even understand the best practices associated with their job.

Why is there a manpower capability issue? A lack of education. These people generally don’t leave college or university with a solid supply chain background, as few institutions offer such programs, and they haven’t been properly trained. Year after year training budgets are slashed and leaders are run ragged fighting fires and dealing with tactical issues instead of being given time to focus on long-term strategy, how the supply chain works, and how it should work for optimal performance and optimal corporate gain. Where supply chain is concerned, not only do we have the reality that you can’t manage what you don’t understand, but you can’t even manipulate what you don’t understand with any level of success. People have to be educated and trained at all levels of the function, and until that happens, up-to-date technology or not, there is not going to be any progress.