I like to say that supply chain management is synonymous with risk management, and the risks are growing every day, everything from natural disasters to cyberattacks. Unfortunately, many companies are falling short in managing these risks effectively. In what ways are they falling short?
“I think it’s in failing to have a supply chain risk strategy,” said Phil Lavin, Development Consultant IT at Siemens Postal Parcel & Airport Logistics, in a recent episode of Talking Logistics. “Many companies do not recognize the risks they’re facing mainly because things have only gone wrong in a small way, in a way that they could manage [quickly and easily] and it’s no big deal. They have the attitude of ‘if it’s not broken, then don’t think about making it better.’”
Even large corporations that might already have a risk management strategy face a daunting challenge. “When you think that a large corporation could be buying from maybe 1,000 suppliers and those suppliers are sourcing from [hundreds or thousands] of second and third tier suppliers, the risks are now phenomenal,” said Lavin. “The chance of something going wrong is almost a case of it will go wrong!”
So what should companies do? As Lavin proposes in the short clip below, the first step is to map your supply chain and understand which suppliers (across multiple tiers) and components/materials are the most critical to your operations.
Lavin also discussed the risks present on the downstream side of the supply chain, as well as internally within companies. Because of mergers and acquisitions and other factors, you often find that “people within the same company are not managing risks [in a coordinated way], they’re not talking to each other, they’re not sharing information.” Simply put, as with other supply chain processes, functional silos hinder the effectiveness of risk management.
Lavin also discussed the role of technology, including cloud-based platforms, in helping companies to better communicate, collaborate, and manage supply chain risks. Watch the short clip below for his perspective:
“Visibility (transparency) is the key,” said Lavin. “But visibility is not just track and trace, in fact that’s just a small component of it. Visibility is the ability to share information with all of the key stakeholders in every aspect of your supply chain. And if you’re giving visibility to all these people, you effectively break down the silos.”
I encourage you to watch the rest of my conversation with Phil for additional insights and advice on this topic. Then post a question or comment and keep the conversation going!