Most managers know that they should protect their supply chains from serious and costly disruptions — but comparatively few take action. The dilemma: Solutions to reduce risk mean little unless they are evaluated against their impact on cost efficiency.Today’s managers know that they need to protect their supply chains from serious and costly disruptions, but the most obvious solutions — increasing inventory, adding capacity at different locations and having multiple suppliers — undermine efforts to improve supply chain cost efficiency.
Managers appreciate the impact of supply chain disruptions, they have done very little to prevent such incidents or mitigate their impacts.This is because solutions to reduce risk mean little unless they are weighed against supply chain cost efficiency. After all, financial performance is what pays the bills.
1. Take a Broad View of Supply Chain
Identify All Relevant Risks
Review Upstream Suppliers
2. Prioritize Around Significance and Likelihood of Disruption
Velocity
Persistence
Response Readiness
Supply chain efficiency, which is directed at improving a company’s financial performance, is different from supply chain resilience, whose goal is risk reduction. Although both require dealing with risks, recurrent risks (such as demand fluctuations that managers must deal with in supply chains) require companies to focus on efficiency in improving the way they match supply and demand, while disruptive risks require companies to build resilience despite additional cost.
Disruptive risks tend to have a domino effect on the supply chain: An impact in one area — for example, a fire in a supply plant — ripples into other areas. Such a risk can’t be addressed by holding additional parts inventory without a substantial loss in cost efficiency. By contrast, recurrent risks such as demand fluctuations or supply delays tend to be independent.
They can normally be covered by good supply chain management practices, such as having the right inventory in the right place. They can reduce risk while also improving supply chain efficiency — a “win-win” – or they can reduce risk while limiting the impact on supply chain cost efficiency.
Presented By
Zeeshan Ilyas
Connecting, Innovating & Inspiring on a Global Level !
Startup Mentor & Supply Chain Coach
A successful career in supply chain necessitates a never-ending thirst for knowledge and the most up-to-date supply chain skills and knowledge. Even though continuing education and certification programs can take time and money, they help get your specialized knowledge or skills recognized.
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Certified Stores and Stock Controller (CSSC)
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Supply Chain Framework and Strategy
Collaboration among Sustainability, Procurement and Supply Chain
Implementing 3PL and 4PL Strategies in the Value Chain
Supply Chain Sustainability with Circularity to Drive Profitability
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