Managing risk set to dominate supply chains

MANAGING risk is likely to be the major concern of the supply chain industry in the 21st century and companies should be shaping network designs based on when disruption occurs, not if...

MANAGING risk is likely to be the major concern of the supply chain industry in the 21st century and companies should be shaping network designs based on when disruption occurs, not if…

This view has been confirmed at recent events where some of the world’s biggest commercial names were asked what they considered to be the greatest threats to business in the foreseeable future.

‘Supplier failure’ emerged as the supply chain professionals’ greatest fear, with corporations most vulnerable to the knock-on effects of natural disasters and the geo-political state of the world.

Almost half the delegates at a key trade show pinpointed China as the region posing the greatest degree of risk – accounting for more supply chain jitters than Eastern Europe and India combined.

One means of countering supply chain risk is through a resilient and responsive supply chain underpinned by an effective risk management strategy.

Globalisation and expansion into low-cost countries have made supply chains inherently unstable for a number of reasons and most supply chains today are characterised by great distance, poor visibility and increasingly complex communication issues, with time-zone differences, language barriers, longer lead-times, and shorter product life-cycles.

Companies employing early warning and detection systems will be the first to recover from any disruption, because the sooner they know about it, the sooner they can fix it.

Those that have planned recovery procedures will recover fastest and minimise the impact of a disruption, and those that learn from the event and redesign their supply chains to make them more defensive against disruption will be more resilient.

Barloworld Optimus has developed a new tool CINO (Combined Inventory and Network Optimisation) which has been specifically developed to model supply chain complexities by combining the increasingly complex ‘route-to-market’ roadmap with the cost/risk trade-offs associated with potential sourcing, replenishment and inventory solutions at both strategic and tactical levels.

Although software tools cannot easily assess unforeseen risk, they can model the effects if asked to, and one of the prime in-built features of CINO is the ability to build and compare complete ‘what if?’ scenarios.

* Greg Webster is business development director at Lexian.