Do You Know What’s At Risk? Resilinc Does!

Resilinc, a new player in Supply Management, has a unique approach to identifying and evaluating risk in your supply chain. Eschewing the transaction-and-finance focussed approach of other players in the risk management space, and building on the lessons learned from SIM (Supplier Information Management) vendors, Resilinc has built a unique approach to identifying and quantifying the relative risks in your supply chain.

Started by a Risk Management practitioner in the high-tech and electronics supply chain, who has a Masters in Engineering in Logistics (from the Massachusetts Institute of Technology), Resilinc not only builds on the lessons learned from SIM, but on the lessons learned from real risk management practitioners and specifically focusses on the electronics and high-tech, medical device, and automotive supply chain – realizing that, when it comes to risk, not all supply chains are created equal.

So what is Resilinc? It’s an affordable DSS (Decision Support System) for larger mid-size and large multi-nationals that need to

  1. identify the most significant risks in their supply chain,
  2. keep tabs on what facilities may be impacted by a significant external event, and
  3. be immediately informed when an event could cause a disruption that requires immediate action.

The solution, delivered using the SaaS (Software-as-a-Service) model, does this by tracking all of the relevant information on each supplier and facility in your organization’s multi-tier supply chain. Whereas a typical SIM solution (that powers a typical financial risk analysis product) will track each supplier, their official information, their insurance certifications, their corporate addresses, etc., Resilinc’s solution tracks each individual manufacturing facility, the products produced at those facilities, the inputs required, the lead times required, and the time taken to get the plant up and running again as a result of a serious disruption (such as a natural disaster, border blockade, strike, etc.). Based on this information, integrated financial and location risk metrics imported from other systems (for which you have a license for), and the relative revenue impact of each product on your total organization revenue, Resilinc is then able to

  1. provide an overall risk score, delivered in terms of the revenue impact of a disruption, for each location and product,
  2. give you the ability to determine the impact of an external event in a given location with respect to supplier locations and sourced products, and
  3. determine which locations and products are likely to be impacted by a significant event anywhere in the world, as soon as it happens (and e-mail you a notice that the event — which may be an earthquake, war, or labour strike — is potentially impacting one or more locations in your supply chain).

Risk Managers can use this to determine which locations and products have the biggest risks, which facilities will be impacted the most as a result of a supply disruption in an area, and which product (line)s are at risk as the result of an event that just happened. And then they can take action.

Resilinc is a powerful tool for the high-tech, medical device, and automotive supply chain, which, until now, were probably too reliant on financial metrics, which are not the only risks one needs to be concerned about in a multi-tier supply chain.

While We’re All Remembering September 11

Let’s not forget September 16. While the scope of the tragedy was much less severe, the Wall Street Bombing of 1920, which took place 82 years ago today, is an indication of what can happen at home if social unrest gets too high. It was the deadliest act of terrorism on U.S. soil up until the day it occurred.

Given the anti Wall-Street resentment, the state of unemployment, and the dire straits America could find itself in if the Federal Reserve does not keep it on track, this, unfortunately, is an event that could conceivably reoccur. In our haste to not forget, let us not forget.

Wait!

That’s right, don’t make that big decision today, Wait and use the art and science of delay to your advantage.

With summer came heat and a new book by Frank Partnoy, Professor of Law and Finance at the University of San Diego and the Co-Director of the Center for Corporate and Securities Law. In Wait, Frank proposes a contrarian perspective on decision making that suggests that slowing down your response time can yield better results as per a recent review over on S+B.

According to Frank, decisions of all kinds, whether “snap” or long-term strategic, benefit from being made at the last possible moment. The art of knowing how long you can afford to delay before committing is at the heart of many a great decision. This is a great maxim for Supply Managers to live by. There’s a reason that sales people often want you to “act now” and have you “take advantage of this deal before it’s too late” is they know that if you don’t act now, and do your homework, you’ll probably figure out the merchandise is over-priced, over-represented, or not quite what you’re looking for and that you can get the same deal, with a bit of patience and negotiating, from a hungrier supplier down the street.

And this goes double for software sales. If the sales-person is paid a variable commission based on total sales for the quarter, or year (which is a stupid way to implement an incentive model, by the way*), at certain times of the year he’s going to be very pressured to just make a sale, any sale, and all too eager to over-promise what he knows the IT department will likely under-deliver on.

This maxim should also be applied in the selection of new logistics providers, supply chain designs, and operating procedure changes. While it is imperative that your supply chain be as lean and mean as possible, it often happens that rushing to meet the goal only results in a whole lot of running as rushed implementations often end up with holes that require a whole lot of rushing to fill. And while it’s likely that you are losing money every day you don’t implement that new supply chain design that is expected to save you millions, if you don’t take the time to do a proper risk assessment, you could lose your savings five times over when a new tariff scheme gets approved in six months (that everyone who did their research saw coming) or a trade agreement expires.

So while you should be exploring new technologies, processes, and innovations that could enhance your Supply Management organization as soon as you discover them, you shouldn’t rush a final decision until you’ve given yourself some time to re-examine all the findings. (But then, once you’re sure, jump in with both feet. If you hold back, in Supply Management, even the best laid plans will fail.)

* While a software company should incentivize it’s sales team to sell more, it should not do so at the cost of customer success. There are better ways to implement an incentive model which will allow both goals to be achieved.

Three Does Not a Monopoly Make

But it does make competition hard and collusion easy. So what am I referring to now? As recently expounded upon in this recent article in the online version of The Economist, UPS has made a bid for TNT (Express), the fourth largest logistic carrier in the world, the second largest in Europe, and the largest in Britain and Italy. If UPS gobbles up TNT, it may not only shift the balance in power in the near-duopoly between FedEx and UPS in the US, but give UPS the edge it needs in Europe to take on DHL toe-to-toe in Europe (where it controls up to 50% of the market). If UPS succeeds, UPS would have at least a quarter of the market in three big European centres — Britain, France, and Italy. Unless Federal Express scooped up DHL (and it’s pretty easy to predict that bid would happen if UPS scooped up TNT), FedEx might soon go the way of the Pony Express in Europe.

While UPS is likely claiming that this will benefit shippers as it will allow them to offer better service at lower prices, the fact that we could soon be dealing with a duopoly, and would effectively be dealing with a duopoly in the US (UPS and FedEx) and Europe (UPS and DHL) is a bad thing. Consider the fact, as pointed out by Leigh Merz in A Shipper’s Right, that UPS and FedEx have already mandated that shippers can only work with FedEx or UPS directly (and not through brokers or other third parties). Hopefully this restriction will be removed as an anti-trust violation in the upcoming court-case between AFMS and the UPS-FedEx anti-trust lawsuit, but until then, United States shippers are already operating at a disadvantage.

And if we get a local duopoly and a global triopoly, there’s a good chance it could only get worse. All it will take to enforce a new, shipper preferred, style of business is for three senior executives to meet for lunch at the Executive’s club, spontaneously decide that, from now on, all products that weigh less than 5 lbs per unit go first class air freight, and, presto, no ocean cargo for you! And all it will take for prices to rise, on average, 5% across the board is for the CEOs to play a around of golf and decide that, next quarter, as a result of fuel increases, all prices will rise an average of 5%. Now, each shipper will still have lanes where it will be more competitive, but switching won’t save significant dollars as the competitors prices rose in sync. Not saying this will happen, but you see how easy it could happen if, by chance, it happens that each organization happens to have at least one senior executive who is less than honourable at all times. And this is an industry where price collusion happens more regularly than it should. As The Economist article noted, in March, the European Commission handed out fines totalling 169 Million Euros to 14 freight-forwarding companies, including UPS subsidiaries, for price collusion.

Right now, the EC is undertaking a phase II merger investigation, as per this recent press release, and has until November 28 to determine whether the proposed transaction would significantly impede effective competition in the European Economic Area (EEA). I hope they do. In the meantime, the case details are available at the EC site and, as per the initiation of proceedings, published in C226, the Commission invites interested third parties to submit their observations on the proposed concentration to the Commission. While it’s now too late to have the observations fully taken into account in the procedure, if you’re a major multi-national with a big voice, it might not be a bad idea to get your observations in anyway. Often, it only takes a few very noisy squeaky wheels to slow things down and force a good look.