Chuck LEAN Business Consultant
Develop a sense, stay informed and know where to look for risk events
Information is power and timely information even more so. Many organizations depend on individual buyers and [removed] . But with thousands of suppliers, this isn’t an easy or efficient mechanism.
Have a consistent and reliable way to collect and disseminate information. Reading newspapers is not enough. Leverage Technology. Sophisticated technologies have made it possible to monitor anything locally – from road disruptions, regulations to human health crisis. In this big data era, there are smart applications that can monitor specific markets and key events in and around those.
However, beware of information overload in this process so your productivity doesn’t suffer. Be prudent about what you choose to monitor, where, and how.
2. Map it all
In the world of ‘just-in-time inventories’, the Ford story is one of the most relevant cases in point. During the Thailand floods, they were forced to shut down the operations of their most profitable line of cars because of their inability to get supplies in time. Later, Ford, realized that they had several sub-suppliers that were also in Thailand and severely impacted as well. So the damage done was incapacitating at an overall level.
Having the entire network of sub-suppliers tracked and mapped is on every sourcing organization’s wish list and rightfully so.
Gather data about sub-suppliers from your primary suppliers or use third party sources to get the information to the database. For more evolved organizations this can be made a part of a stricter supplier onboarding process. Making it mandatory for primary suppliers to disclose their sub-suppliers could go a long way in protecting your supply chain in the future.
Also, map local supplier development teams to sub-suppliers. So you know where to go and who to speak to whenever a risk threatens your Supply Chain.
3. Plan for alternates
An easier way out of such risks could be to have a ready-repository of alternative suppliers identified.
Do not wait until the last moment to discover and identify these alternate sources since your competitors and customers probably have them on their speed dial already. These alternates should be identified for every critical function of your supply chain and preferably be geographically diversified to [removed] .
It is crucial for your primary suppliers to zero down on alternatives since risk becomes exponentially higher as one goes down the value chain.
4. Tackle it at the design stage
Sourcing is a supply organization’s drawing board. Considering the intelligence of past and future events, while making sourcing decisions builds risk resilience within an organization in the design stage itself.
IMPORTANT QUESTIONS TO ASK ARE
- Have we looked at a supplier’s proneness to such events?
- Is there transparency in revealing one’s sub-supplier network?
- What does disaster recovery look like?
- Have the suppliers identified alternatives?
Once you include these in the supplier ranking mechanism and assign relevant weights to it, you will not fall victim to the domino effect of external supply chain risk.
5. Have a continuity plan
Having a business continuity plan is considered a hygiene factor. Ideally, everyone should know where to start and what to do when such events strike. If your organization does not have this figured, then this is the place to start and then move forward.
What has your experience been with supplier risk in the age of coronavirus?
Supplier risk is not just related to Corona virus, risks arise from a wide range of factors. I would start with some scenario planning. In looking at risk recently I developed three scenarios:
Pandemic World
Warming World
Conflict World
I examined the impact that each scenario would have and suggested the potential mitigating actions. Interestingly, there were actions that were common across all three scenarios as well as actions that were specific to each scenario. The major impact was likely to be felt in those businesses with supply chains that extended to the Middle and Far East.
Using scenarios enables one to take a proactive approach rather than a reactive one.
Just in Time has many benefits but carries risks as well and identification of those parts subject to the most risk in each of the scenarios should enable one to decide on strategic stocks for the most risky items. These actions should also be considered along with options for on-shoring and near-shoring as well as investing in the company's supply chain to further reduce any risks.